Import of “Concrete Batching Plant” Not eligible for Customs Exemption Claim: Supreme Court rejects plea

A two member bench of Supreme Court has held that that the import of the "Concrete batching plant" by Gammon cannot be considered an import by M/s GammonAtlanta JV, "a person" awarded the contract for the construction of roads in India. M/s Gammon India Ltd. (Gammon) and M/s Atlanta Infrastructure Ltd., Mumbai (Petitioner), both incorporated as Public Limited Companies, entered into a joint venture agreement on September 18, 2000, named "Gammon Atlanta JV." This joint venture aimed to submit a bid to the National Highways Authority of India (NHAI) for a road construction contract. The joint venture agreement specified that each party would share financial responsibilities, manage the venture through a management board, and both companies would be jointly and severally liable for the contract's execution. Although Gammon was designated as the lead partner, both companies were jointly liable to NHAI. The bid was accepted, and an agreement between NHAI and Gammon Atlanta JV was executed on December 20, 2000. On March 1, 2001, the Central Government issued Exemption Notification No. 17/2001cus, granting full exemption from basic Customs duty and additional Customs duty on goods required for road construction. Condition No. 38 of the notification outlined specific conditions for claiming the exemption. Gammon, with a certificate from NHAI, imported a concrete batching plant from Germany and sought exemption on payment of duty. The Deputy Commissioner of Customs rejected the claim, citing non-compliance with Condition No. 38. The Commissioner of Customs (Appeals) allowed the appeal, considering Gammon's role as the lead partner in the joint venture. The Tribunal, in the impugned order, distinguished the case of New Horizons Limited & Anr. Vs. Union of India & Ors., concluding that joint ventures cannot avail themselves of the exemption since they are mere associations of two persons with no legal identity. The appellant argued that a joint venture is a legal entity with all the trappings of a partnership under the Indian Partnership Act, 1932, the general principles of the said Act were applicable to the joint venture. Therefore, any one of the two partners of the joint venture, namely Gammon and Atlanta, was competent to import the subject machinery for and on behalf of the contractor, i.e., the joint venture, for the execution of the road project under the contract between the joint venture and NHAI. It was argued that the eligibility certificate dated 3rd August 2001, issued by the Ministry of Road Transport and Highways, stating that the subject machine would be imported by the appellant herein, will sustain the eligibility of the joint venture in view of the law laid down by this Court in New Horizons. It was further contended that in view of an inclusive definition of the word "person" in the Export and Import policy for the years 1997-2002, which includes a "legal person," the import of machinery by the appellant for and on behalf of the joint venture is as good as an import by the joint venture who has been awarded the contract for the construction of roads, thus fulfilling condition No. 38 of the Exemption Notification. Revenue contended that the joint venture and Gammon being two independent entities, the eligibility certificate dated 3rd August 2001 issued in favor of the latter was of no consequence in so far as the Exemption Notification was concerned because the contract for the construction of roads had not been awarded to Gammon, who had imported the machine but to the joint venture. Revenue further contended that Gammon on their own, were not entitled to import any goods for the execution of road works under the contract awarded to the joint venture by NHAI. The bench comprised of Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar.The bench observed that The bench noted that a joint venture has the potential to adopt the form of a corporation, where two or more individuals or companies come together. This requires a shared interest in the performance of the subject matter, the right to direct and govern policy in connection with it, and a duty, alterable by agreement, to share both profits and losses. A joint venture is an association of two or more persons undertaking a single business enterprise for profit. It can also manifest as a corporation, where individuals or companies join forces within the corporate framework for specific undertakings commonly found in fields like oil, chemicals, electronics, and atomic industries. The bench pointed out that the tribunal had noted that the correspondence with the supplier and placement of the order were conducted by Gammon, not by the joint venture or on their behalf. It was also admitted that payment for the machine was not made from the joint venture account designated for the contract but from Gammon's funds.Therefore, the inevitable conclusion is that the import of the "Concrete batching plant" by Gammon cannot be considered an import by M/s GammonAtlanta JV, "a person" awarded the contract for the construction of roads in India. Consequently, neither Gammon Atlanta JV nor Gammon fulfills the necessary requirement stipulated in Condition No. 38 of Exemption Notification No. 17/2001. The petitioner was represented by S. K. Bagaria and Chirag M. Shroff. Revenue was represented by Sushant Dogra and Dhananjay Kataria. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates