By TIOL News Service

MUMBAI, MAR 19, 2013: THE appellant imported a consignment of "Electronic Sensor Paver Vogetel model super 1800-2 with AB 600-2 TC screed" for laying bituminous pavement upto 9 M width along with accessories and claimed duty exemption under notification No. 21/2002-Cus dated 1-3-2002 vide Sl. No. 230 of the Table annexed to the said notification.

The assessing officer denied the benefit of exemption on the following grounds -

+ that the equipment imported by the appellant has a base width of 3 meters only with hydraulic extension upto 6 meters and mechanical expansion upto 9 meters. Since the notification specified that the device should have width 7 meters and above, the equipment did not satisfy the description specified in the notification.

+ the contract was awarded by M/s NHAI to M/s Gorakhpur Infrastructure Company Ltd. (GICL in short) and the contract did not mention M/s Gammon as a sub-contractor as envisaged in the said notification.

The lower appellate authority upheld these findings and hence the appellant is before the CESTAT.

The appellant made the following submissions to buttress their claim for exemption:-

(1) It is the capability to pave and not the width of the machine that will determine eligibility to exemption. In the instant case, as per the product catalogue, though the base weight of the paver is 3 meter, the width can be varied upto 6 meters with the single tube telescoping system. With the addition of bolt on extensions, the screed builds up for joint free paving to a maximum, width of 9.5 meters. Thus the equipment satisfies the criteria of laying bituminous pavement 7m size and above.

(2) The contract was awarded by NHAI to the consortium M/s GICL vide concession agreement dated 6 th October, 2006 and the members of the consortium are - 1) M/s Gammon India Ltd., the appellant, having 51% share in the consortium; 2) M/s Gammon Infrastructure Projects Ltd. having 39% share in the consortium and 3) M/s Associated Transrail Structures Ltd. having 10% share in the consortium. The appellant was the lead member of the consortium. As per the Concession Agreement, the agreement includes Request for Proposal (RPF) document issued by the NHAI and any amendments thereto made in accordance the provisions contained in the agreement apart from the agreement and its schedules ‘A' through ‘X' thereto. The RPF document requires execution of Memorandum of Understanding (MOU) and as per the MOU dated 24-1-06, the role of the appellant was defined as that of carrying out construction work. Further as per the agreement "contractor" means the contractor or contractors, if any, with whom the concessionaire has entered into all or any part of the Project Agreements. The appellant had executed an EPC contract dated 14-4-2007 with M/s GICL. Therefore, the appellant should be deemed as a sub-contractor and therefore, they are rightly entitled for the benefit of duty exemption.

The Revenue representative justified the order of the lower authority by reiterating the findings made therein and also submitted that the apex court in the appellant's own case - (2011-TIOL-60-SC-CUS) in a similar situation had held the appellant ineligible for the exemption.

The Bench after extracting the relevant provisions of the exemption notification 21/2002-Cus observed -

"5.3 In the product catalogue available in the records, the product specifications for Electronic Sensor Paver Vogetel model super 1800-2 with AB 600-2 TV are given. The screed width is the relevant criterion as that determines the width of the paving. The AB 600-2 Extending Screed has a basic width of 9ft. 10 in. (3 meters). Equipped with the Vogele single-tube telescoping system, its pave width is infinitely variable upto 19ft. 8 inches (6 meters). By addition of bolt-on extensions, the screed builds up for joint-free paving to a maximum of 29ft. 6 inches (9.5 meters). In other words, the equipment per se has a basic width of 3 meters extendable upto 6 meters with the telescopic tubing system. With the addition of bolt on extensions only, the width can be raised to 9.5 meters. Bolt on extensions come in three sizes, namely, 25 cm, 75 cm and 125 cm. The notification refers to the pave width of the equipment and not of the extensions that can be attached to the equipment to increase the same. As the maximum pave width of the equipment is only 6 meters, it does not satisfy the criterion of 7 meters size and above. If the intention was to cover the width of the bolt-on extensions also, the same would have been so specified in the notification. Thus from the product catalogue, it is amply clear that the equipment under import does not satisfy the product specification stipulated in List 18 of the notification and consequently, the equipment under importation does not qualify for the benefit of exemption and we hold accordingly.

5.4 It is a well-settled position in law that an exemption notification, being an exception, should be strictly construed. The principle of strict interpretation of taxing statutes is best enunciated by Rowlatt J in his classic statement:

"In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."

Applying the above principle to the facts of the present case, the equipment under import does not fall under the category of size 7 meters and above specified in List 18 serial no. 2 of the notification and we hold accordingly.

6. The next issue for consideration is whether the appellant is eligible to claim the duty exemption in terms of sub-clause (iii) of clause (a) of condition 40. The contract in this case was awarded by NHAI to the consortium M/s GICL which comprises the appellant, M/s Gammon India Ltd. as its lead member with two other members. The appellant's name is not mentioned as a sub-contractor in the concession agreement dated 6 th October 2006 entered into between NHAI and M/s. GICL. …

6.1 In pursuance to the RFP, an MOU dated 24 th January, 2006 was entered into by three members of the Consortium, namely, M/s Gammon Infrastructure Projects Ltd., and M/s Associated Transrail Structures Ltd. for forming a Special Purpose Vehicle (SPV) with shareholding commitments expressly stated to domicile the Project prior to the start of implementation of the Project. The MOU was in the context of NHAI inviting Qualification and Financial Proposal from entities interest in "Design, Construction, finance, operation and maintenance of km 0.00 km to km 32.27 of Gorakhpur Bypass on NH-28 in the State of Uttar Pradesh on Annuity Basis". The MOU was reached with respect to member's (of the consortium) rights and obligations towards each other and their working relationship. As per clause 8 of the said MOU,-

6.2 The argument of the appellant is that this MOU which is part of RFP should be considered as a sub-contract and the appellant, M/s GIL should be deemed as a sub-contractor. This argument is totally illogical and unacceptable for the following reason. Firstly the MOU was reached among the members of the consortium for forming a Special Purpose Vehicle with shareholding commitments expressly stated. Secondly the MOU was reached with respect to each member's rights and obligations towards each other and their working relationship. By no stretch of imagination, this MOU can be considered as a sub-contract. A sub-contract has to be between the main Contractor who is M/s GCIL on the one hand and the appellant, M/s GIL, on the other spelling out the terms and considerations for the contract and such sub-contractor has to be named specifically in the concession agreement between NHAI and M/s GICL. That is not the position obtaining in the present case. As per the terms of the notification a person has been named as sub-contractor in the contract referred in (ii) above, that is in the contract between NHAI and M/s GICL in the instant case. The word "named" signifies "to make reference to or speak about briefly but specifically" (ref. webster's online dictionary). In other words, the appellant should be specifically named or designated as a sub-contractor explicitly. We do not find any such specification of the appellant as a sub-contractor in the instant case. Accordingly we hold that the appellant has not satisfied condition No.40 (a) (iii) stipulated in the notification. Consequently, the appellant is not eligible for the benefit of duty exemption under the said notification.

6.9 The facts of the present case are very similar to the case decided by the hon'ble apex court in the appellant's own case cited supra. Notification No. 17/2001 was the predecessor to notification No.21/2002. Condition No.38 (a) specified in notification 17/2001 is identical in wording to condition No. 40(a) specified in notification No.21/2002. The appellant is also the same in both these cases. The conditions of the contract are also the same. The only difference is that earlier appellant claimed the benefit under the category of a "Contractor" which was negatived by the hon'ble apex court. In the present case, the appellant has changed the claim from a contractor to that of a "sub-contractor". For the reasons already discussed in paras 6 to 6.4 above, we have held that the appellant cannot be considered as a sub-contractor since he has not been named as such in the contract awarded to the consortium. Therefore, the ratio of the above judgment and principles of interpretation laid down therein apply squarely to the present case before us."

Holding that there is no merit in the appeal, the same was dismissed.

(See 2013-TIOL-471-CESTAT-MUM)