Holding

The Court held that CEGAT erred in deciding the case solely on the overruled larger‑bench precedent and that the classification of the imported material must be determined by applying the dual physical‑functional test, giving priority to the specific heading 49.01; therefore the appeals are allowed and the matter remitted to CESTAT.

Summary

The Commissioner of Customs ordered duty and penalties on Mis. Gujarat Perstorp Electronics Ltd. for importing drawings, designs and plans (FEEP) under a technical know‑how agreement, classifying them as manuals rather than "books" and denying exemption under Chapter 49.06. CEGAT set aside the order, relying on a larger‑bench decision that had held such documents to be "books" and exempt. The Supreme Court held that CEGAT erred by not applying the proper dual test—physical and functional characteristics—to determine whether the imported material qualifies as a "book" under Chapter 49.01, and by giving undue weight to the overruled larger‑bench ruling. It emphasized that the specific heading 49.01 prevails over the residual 49.11 and that classification must be decided on the facts of each case. Consequently, the Court set aside CEGAT’s order and remitted the matter to CESTAT for fresh consideration, without awarding costs.

Issues considered

The correct tariff classification of imported drawings, designs and plans under Chapter 49.01, 49.06 or 49.11 of the Customs Tariff Act.
Whether the goods qualify as "books" eligible for exemption under Notifications 107/93‑Cus and 38/94‑Cus.
The effect of the earlier CEGAT larger‑bench decision in Parasrampuria Synthetics Ltd., which was later overruled by this Court.
The propriety of imposing customs duty and penalties on the assessee.

Legislation cited

Customs Act, 1962s. 111(m), s. 112, s. 28(1)
Income Tax Act, 1961s. 32, s. 43(3)

Subjects

customs dutytariff classificationprinted bookstechnical know‑howexemption notificationsCEGATCESTATpenaltylarger bench decisiondual testfunctional test

Judgment

COMMISSIONER OF CUSTOMS (GENERAL), A
NEW DELHI ETC. ETC.
v.
MIS. GUJARAT PERSTORP ELECTRONICS LTD. ETC. ETC.

AUGUST 5, 2005
B
[RUMA PAL, ARlJIT PASAYAT AND C.K. THAKKER, JJ.]

Customs and Tariff Act, 1975-First Schedule-Chapter Headings
49.06 and 49.11-Customs Act, 1962-Section 28(/), 11 l(m) and /12-
Dra1vings, designs and plans imported under technical "Know Ho1v" and c
"Basic Engineering Agree1nent"-Assessee clain-1ed exemption from custor.1s
duty placing imported goods as ''printed books" under chapter heading
49. 06-Revenue placed them under Chapter 49.11 holding them to be
manuals or brochures pertaining to processes-Duty demanded was confirmed
and pena/ities imposed-CEGAT allowed appeal on the. basis of its larger D
Bench judgment-larger Bench judgment of CEGAT overruled later on, in
another matter-On appeal, niatter referred to a larger Bench owing to
subsequent overruling of the judgment followed by CEGA T and conflicting
ratios of certain judgments-Held, a clear error of law con1mitted while
overruling the larger Bench decision followed by CEGAT-Facts and
circumstances of a case should decide whether draiving, designs and plans E
could be said to be a "book" or not-49.01 is the basic heading dealing with
''printed books" and 49.11 covers other printed 111aterial, maJ.. ·ng, it a
residual entry-Priority to be given to the n1ain enlly and not the residual
entry-if covered by a specific item, the residuary item has no application-
Matters remitted back as other rival contentions lvere not considered in the F
backdrop of the larger Bench judgment of CEGAT-Export and Import
Policy, 1992-1997-Para 14.

Mis. P, Ltd. set up a new plant on the basis of a technical "Know
How" and "Basic Engineering Agreement" with Mis Z of Germany,
Revenue Intelligence was informed that Mis. P, Ltd. had imported actual G
goods under the Export Promotional Capital Goods Scheme (EPCG) at
a concessional rate of duty and thereafter diverted some of the goods to
the local market, violating conditions of import under Para 14 of the
Export and Import Policy 1992-97. All documents and details were
scrutinized along with physical inspection of imported goods, which H
389
390 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A indicated no such divergence. However, it was noticed that designs,
drawings and plans were imported under the said agreement without
payment of the appropriate amount of customs duty. A show cause notice
was issued under Section 28 (1) of the Customs Act, 1962 asking as to why,
the requisite duty should not be demanded; an amount of Rs. 20,00,000
deposited voluntarily should not be adjusted against the duty demanded;
B
the goods i.e. drawings, designs, plans etc. imported in three consignments
should not be held liable to confiscation under Section 111 (m) of the Act
and penalty should bot be imposed under Section 112 of the Act. The
reply stated that as per the Bill of Entry, the imported goods were in the
category of "books" under Chapter Heading 49.06 in the First Schedule
c to the Custom and Tariffs Act, 1975, exempted by various Government
notifications. Therefore, reassessment under Chapter Heading 49.11 was
refuted as drawings, design plants etc. could be classified as "printed
books".

The Commissioner of Customs held that the imported goods pertained
D
to processes and were in the shape of manuals, brochures or leaflets,
distinguishable from printed books, making them liable for customs duty.
The duty demanded was confirmed, the voluntary deposit was adjusted,
a penalty of Rs. 1 Crore was imposed along with penalizing the Chairman-
cum-Managing Director and the Director of M(s. P. Ltd. They and Mis.
E P. Ltd. filed three appeals in CEGAT, whereas the Revenue filed two
cross appeals for enhancement of penalties. CEGAT noted that a previous
decision of its larger Bench of the same issues was binding on it, therefore,
set aside the order in challenge and also dismissed the cross appeals.
Aggrieved by this order th~ Revenue prefer~ed these appeals, which were
referred to a larger Bench owing to overruling of the judgment upon
F
which CEGAT had based its order. The judgment, overruling the larger
Bench of CEGAT also fell in conflict with the ratio of a later judgment.

The appellants contended that as the judgment upon which CEGAT
had based its order had been overruled so the present appeals deserve
G to be allowed; and that in the alternative remand the matter back to
CEGAT as various points raised at the time of hearing were not considered
owing to the application of the larger Bench judgment followed by CEGAT.

The respondents contended that the view taken by the larger Bench
H of CEGAT was correct and therefore could not have been interfered in
COMMR. OF CUSTOMS v. GUJARAT PERSTORP ELECTRONICS LTD. 391

appeal; that overruling the judgment of the larger Bench of CEGAT by A
distinguishing the case from various earlier decisions was improper and
also conflicting in view of the ratio of a later judgment.

Allowing the appeals, the Court

HELD : 1.1. In popular sense, "books'' means a collection of a B
number of leaves or sheets of paper or of other substance, blank, written
or printed, of any size, shape and value, held together along one of the
edges so as to form a material whole and protected on the front and back
with a cover of mor<>I or less durable material. One must refer not only
to the physical, but/also functional characteristic of "books". It must be
functionally useful for the purpose of assessee's busint>Ss or profession. c
It must be tool of his trade- an article which must be part of the apparatus
with which his business or profession was carried on. It must have utility
value enabling its owner to pursue his business or profession with greater
advantage. It must, thus, satisfy a dual test. It must bear both physical
and functional characteristics of a book. It must be a collection of a D
number of sheets of paper or of other substance, having suitable size,
shape and value, bound together at one edge so as to form a material
whole and protected on the front and back with covers of some kind and
functionally useful to the assessee for carrying on his business or profession.
(411-A-D]
E
1.2. The two Judge Bench proceeded on the basis of the submission
on behalf of the Revenue wherein it was contended that a book rrust have
certain features, in the absence of which it could not be a book. When
the expression book is not defined in the Act, the natural and ordinary
meaning of the said expression must be kept in view. The proper way was
to come to a conclusion that the deciding factors would be the facts and F
circumstances ofa case so as to conclude, whether Drawings, Designs and
Plans in a case on hand could be said to be a "book", or not. A clear error
of law has been committed, by not doing so. [415-G-H; 417-B-D]

Associated Cement Co. Ltd. v. Commercial Tax Officer, [2001] 4 SCC
593, relied on. G
Scientific Engineering House Ltd. v. CIT, [1986) 1 SCC 11;
. · Parasrampuria Synthetics Ltd. v. Commissioner of Customs, New Delhi,
(2000) 119 ELT 211; (2000) 38 RLT 846 (L.B.); Mitutronics v. Collector
of Customs, (1990) 46 ELT 500; Roto Inks (P) Ltd. v, Collector o/Cusoms,
H
392 SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.

A (1990) 47 ELT 398; Tata Consultancy Services v. Cqllectur of Customs,
(1991) 53 ELT 454; Collector a/Customs, Madras v. Tata Elxsi India Ltd,
(1995) 78 ELT 370; Lakshmi Cement v. Collector of Custom, New Delhi,
(1996) 84 ELT 271 and Commissioner of Income Tax, Gujarat v. Elecon
Engineering Company Ltd., (1974) 96 ITR 672 (Guj.), approved.
B Commissioner ofCustoms, New Delhi v. Parasrampuria Synthetics Ltd.,
[2001I9SCC74; Tractors and Farm Equipment Ltd. v. Collector a/Customs,
(1993) 68 ELT 234, overruled.

Pretyman v. Pretyman, (1931) 1 Ch. 521; Yarmouth v. France, [1887)
19 QBD 647 and Inland Revenue Commissioners, v. Barclay Curle & Co.
c Ltd., (1970) 76 ITR 62 (HL), referred to.

Penguin English Dictionary; Concise Oxford Dictionary; New Webster's
Dictionary; Words and Phrases (Permanent Edition), referred to.

2. The matter could be looked at from another angle also. Harmonized
D System of Nomenclature (HSN) has dealt with the relevant point and as
per Explantory Note, it would fall under Chapter Heading 49.01. Therefore,
sub-heading 4911.99 would not cover it. Therefore, even that aspect has
to be considered and kept in mind while de<:_iding as to whether Drawings
Designs and Plans could or could not be said to be 'printed book' covered
by Chapter Heading 49.01, 49.06 or sub-heading 4911.99.
E [418-B-C; 419-A-B)

Collector of Central Excise, Shillong v. Wood Craft Products Ltd,
[1995) 3 sec 454, relied on.

Collector a/Central Excise Hyderabadv. Backelite Hy/am Ltd, [1997)
F 10 sec 350 and Collector of Customs, Bombay v. Business Forms Ltd Thr.
O.L., (2002) 142 ELT 18 SC, affirmed.

3. It is neither disputed nor can be disputed that the basic heading
is 49.01, \\'.hich
)
deals with "Printed books, brochures, leaflets and similar
printed matter, whether or not in single sheets." 49.11 covers "other
G printed matter, including printed pictures and photographs". Thus specific
or basis heading is 49.01 and residual entry is 49.11. Therefore, priority
has to be give to the main entry and not the residual entry. A residuary
item can be referred to and such item can be applied only when goods
are shown to be not falling under any other specific item. If a specific item
H covers them, the residuary item has no application. (419-B-E]
COW.1R. OF CUSTOMS 1·. GUJARAT PERSTORP ELECTRONICS LTD. [THAKK.ER, J.] 393

Associated Cement Companies Ltd. v. Commissioner ofCustoms, (2001] A
4 sec 593, relied on.

Indian Metals and Ferro Alloys Ltd., Cuttack v. Collector of Central
Excise, Bhubaneshwar, (1991] Supp. 1 SCC 125; Bharat Forge & Press
Industries v. Commissioner of Central Excise, [1990] 1SCC532, affirmed.
B
4. All contentions raised by the assessee have to be dealt with and
decided in the light of relevant statutory provisions of the Act and the
.. Rules as also on basis of decided cases on the point. CEGAT disposed of
all the appeals merely on the basis of its larger Bench decision without
considering rival contentions on merits nor recorded findings thereon, so
it would be appropriate and in the fitness of things to remit the matters
c
to CEGAT, now Customs, Excise and Service Tax Appellate Tribunal
(CESTAT) to decide them on all points in accordance with law in the light
of the present observations. The order passed by CEGAT is set saide.
[419-H; 420-A-C)
D
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8565-8569
of 2001.

From the Judgment and Order dated 19. 12.2002 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. Nos.
426-430/2000-D in A. Nos. C/402-404/98-D, C/417 and C/466 of 1997-D. E
Mohan Parasaran, Additional Solicitor General, A.K. Ganguli, Rajiv
Dutta, Sr. Advs., T.A. Khan, Rupesh Kumar, P. Parameswaran, B. Krishna
Prasad, Advs. with them for the Appellant.

Mis. Suresh A. Shroff & Co., (NP), V. Lakshmi Kumaran, F
V. Balachandran and Rajesh Kumar for the Respondents.

The Judgment of the Court was delivered by

C.K. THAKKER, J. : These appeals are directed against a common
judgment and order dated December 19, 2000 passed by the Customs, Excise G
and Gold (Control) Appellate Tribunal (hereinafter referred to as 'CEGAT').
By the said order, CEGAT disposed of five appeals filed by Mis. Pearl
Engineering Polymers Limited ('Company' for short) and by its Directors as
... also by the Commissioner of Customs, New Delhi. CEGAT, by the order
impugned in the present appeals, allowed three appeals filed by the Company
H
394 SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.

A and its two Directors and dismissed two appeals filed by the Commissioner
of Customs. CEGAT set aside the Order in Original passed by the
Commissioner of Customs, New Delhi on December 30, 1997.

To appreciate the controversy raised in the present appeals, relevant
facts as noted in the Order in Original by the Commissioner of Customs may
B
be stated· in brief.

According to the Commissioner of Customs-appellant herein, Mis.
Pearl Engineering Polymers Limited ('Company') was registered under the
..
Companies Act, 1956. Mr. Chand Seth was the Chairman-cum-Managing
c Director of the Company and Mr. Arun Gupta was whole time Director. The
Company was engaged in the manufacture of Polyester Chips (High Pressure
and Molding Grades) and other Polyethelene Terephthlate (PET) Bottle
Grade and Film Grade since 1995. For the purpose of the said products, the
Company set up a plant at Kurkumbh, District Pune in the State of
Maharashtra. The plant had been set up on the basis of the technical know
D how. For that the Company entered into a 'Know how' and 'Basic
Engineering Agreement' with Mis. Zimmer AG of Germany ('Zimmer' for
short) on May 4, 1993. The agreement was negotiated and signed by Mr.
Chand Seth and Mr. Arun Gupta. Both of them thus were aware of the terms
and conditions and contents of the agreement. The agreement was approved
E by the Ministry of Industry and also by the Reserve Bank of India. The
primary object of the agreement was to acquire requisite know how for the
products of the company.

According to the Revenue, Intelligence was gathered by the Officers
of Directorate of Revenue Intelligence (DRI), Mumbai that the Company had
F imported actual goods under the Export Promotional Capital Goods (EPCG)
Scheme at the concessional rate of duty and thereafter diverted some of the
goods in the local market. It thus appeared that the Company violated
conditions ofimport of capital goods under Para 14 of the "Export and Import
Policy, 1992-97" as the import of goods was subject to actual user condition
G till the export obligation was completed. In view of the •ntelligence Report,
details of the import by Company urider EPCG Scheme were collected. As
per the details, the Company was issued licence Nos. (a) p/CG/2133135 dated
2.6.94, (b) p/CG/2133262 dated 9.7.94 and (c) P/CG/2133763 dated 30.12.94.
After scrutiny of import documents, licences were issued. The goods
appeared to be imported in conformity with the items permitted under the
H
COMMR. OF CUSTOMS 1•. GUJARAT PERSTORP ELECTRONlCS LTD. [THAKKER, J.] 395

licences. The Company also submitted copies of Letter of Credit (L/C), A
Equipments Supply Agreement between Zimmer and the Company and copy
of Proforma Invoice No. 1863 dated 4th May, 1993. Physical inspection
of imported goods was also made by visiting the plant site. The plant was
in working condition and the capital goods indicated that there was no
divergence of capital goods under EPCG Scheme. On verification of EPCG B
Scheme between Zimmer and the Company, it was noticed that the Company
had collected from Zimmer Know how, Basic Engineering Agreement and
Technical Assistance Agreement. The Company had imported designs,
drawings and plans under the Know how and Basic Engineering Agreement
on which appropriate amount of customs duty had not been paid.
c
A show cause notice was, therefore, issued on November 16, 1996
to the Company, Mr. Chand Seth, Chairman-cum-Managing Director and Mr.
, Arun Gupta, whole time Director asking them to show cause as to why
custom duty amounting to Rs. 4, 18, 12,425 should not be demanded under
Section 28(1) of the Customs Act, 1962; an amount of Rs. 20,00,000
D
deposited by the Company voluntarily should not be adjusted against the duty
demanded; the goods i.e. drawings, designs, plans etc. imported in three
consignments having a total assessable value of Rs. 7,98,33,370 should not
be held liable to confiscation under Section 111 (m) of the Act and penalty
should not be imposed on each of them under Section 112 of the Act.
E
Mr. Chand Seth, Chairman-cum-Managing Director of the Company
replied to the show cause notice stating therein that he being the Chairman-
cum-Managing Director of the Company was not inv~lved in day-to-day
functioning of the Company which was taken care by Executives and other
employees of the Company. As the Chairman-cum-Managing Director, F
overall policy decisions were taken by him. He was, hence, not liable to
penal action under Section 112 of the Act as he was not involved in the actual
import of drawings, designs, plans, etc.

Mr. Arun Gupta, Director of the Company, in his reply, contended that
Know how and FEEP were procured through courier after declaration to G
Customs Authorities and one of the consignments was sought to be cleared
vide Bill of Entry dated December 28, 1993. While the classification in the
Bill of Ent1y was claimed under Chapter Heading 4906 and exemption under
Notification No. 36/93, the Customs Authorities were of the view that
Heading No. 4906 was not applicable. According to him, the books were H
396 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A exempted from custom duty. He, therefore, refuted the custom's claim for
reassessment under Chapter Heading 4911. According to him, at any rate,
the entire value for the consignment which came under Air Way Bill was of
Rs. 63.11 lacs (approx) as per Invoice Nos. 1836-02A and 1836-92B dated
December 22, 1993 which could hot be taken as value of drawings for the
B reason that the consideration was to be appropriated against several other
obligations of Zimmer under the agreement. The consignment came after
full declaration to the Custom Authorities and there was bona fide belief on
the part of the company that the drawings were fully exempted under Chapter
Heading 4906. At any rate, books were exempted under various notifications.
There was thus no intention to evade payment of custom duty. The plea taken
c on valuation of drawings at DM 1,30,000 in the letter dated September 30,
1997 was without prejudice to the basic contention that the entire consignment )

was exempted as 'books' and not liable to payment of duty. No penalty,
therefore, could be imposed either on the Company or on the officers.

D Personal hearing was afforded to the Company on October 01, 1997.
Advocates for the Company appeared. Mr. Chand Seth, Chairman-cum-
Managing Director, Mr. Arun Gupta, Director and K. Srinivas, Consultant
contested the matter. Time was sought for filing written arguments which
was granted and written submissions were filed on 10th October, 1997 raising
several contentions on the basis of various clauses in the agreement and on
E the merits of the matter. Reliance was also placed on certain decisions of
this Court as well as of CEGA T. The main argument on behalf of the
Company was that the supply was of printed books which was covered by
Chapter Heading 49.01. Since they were exempted under Notification No.
107/'93-Cus dated March 30, 1993 and Notification No. 38/'94-Cus dated
F March 1994, the Company was not at all liable to pay custom duty. The
Company also contended that the notifications were omnibus notifications
and even if goods were covered by Chapter Heading 49.06 or 49.11, full
exemption was granted. Thus, notwithstanding the fact that FEEP could be
classified under Chapter Heading 49. l l, in view of they being "Book" were
covered by Exemption Notifications and there was no liability of the
G Company to pay custom duty. Reference was also made to HSN notes and
it was submitted that Drawings, Designs and Plans could be classified as
Printed Books by virtue of Interpretation Rules of 1988. The entire FEEP,
therefore, could be exempted and there was no substance in the allegation
of the department that the Company was liable to pay custom duty.
H Objections were also raised as to limitation and on valuation.
COMMR. OF CUSTOMS 1·. GUJ_ARAT P£RSTORP ELECTRONICS LTD. [THAKKER, J.J 397

The case of the department, on the other hand, was that PEEP and A
Drawings, Designs and Plans ought to be classified under Chapter Heading
49.11. As they could neither be covered by 4911.10 (Trade Advertising
Material, Commercial Catalogues and the like) nor by 4911.11 (Pictures,
Designs and Photographs), the relevant entry was sub-heading 4911.99
(Others) and was liable to pay customs duty at 25%.
B
The Commissioner of Customs considered the averments of the
department and the reply submitted by the Company and by Mr. Gupta.
According to the Commissioner, an agreement was entered into between
Zimmer and the Company and the said fact was admitted by the Company.
In consideration of supply of PEEP, an amount of BM 34,00,000 equivalent C
to Rs. 7,98,33,370 was to be paid by the Company to Zimmer. Out of the
said amount, DM 26,00,000 was to be paid for FEEP and DM 8,00,000 was
for Know how. Considering the decisions cited before him, the Commissioner
held that the goods imported under Know how pertained to processes and
were in the shape of manuals, brochures or leaflets. According to him,
printed books and manuals both were classified under sub-heading 4901.99
D
but were distinguishable. Exemption Notifications referred by the Company
applied to Printed Books under Chapter Heading 49 but did not apply to the
goods in question. He, therefore, held that the technical documents imported
by the Company as part of Know how were not 'Books' but were manuals/
brochures classifiable under Chapter sub-heading 4901.99 and were not E
exempted under the Exemption Notifications. The Company was, therefore,
liable to pay duty thereon.

Accordingly, the following order was passed :

ORDER F

"54. In view of the findings hereinabove:-

a) I confirm duty demand of Rs. 4,18,12,425.

b) I order adjustment of the amount of Rs. 30 lakhs deposited by
G
Mis. Pearl Engineering Polymer Ltd., voluntarily, towards the above
confirmed demand of duty and direct that the remaining amount be
paid forthwith.

c) I hold that the goods are liable to confiscation under Section H
398 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A 11 l(m) of the Customs Act, 1962. However, since the goods are
not available, I refrain from ordering confiscation.

d) I impose under Section 112 of the Customs Act, 1962 a penalty
of Rs. I crore (Rupee one crore) on Mis. Pearl Engineering Polymer
Ltd.,
B
e) I impose penalty of Rs. 50 lakhs (Rupees fifty lakhs) on Shri
Chand Seth, Chairman-cum-Managing Director of Mis. Pearl
Engineering Polymer Ltd., under Section 112 of the Customs Act.

c f) I also impose a penalty of Rs. 25 lakhs (Rupees twenty five
lakhs) on Shri Arun Gupta, Director of Mis. Pearl Engineering
Polymers Ltd., under Section 112 of the Customs Act, 1'962.

55. The penalties shall be paid forthwith."
D
Being aggrieved by the Order in Original passed by the Commissioner
of Customs, five appeals came to be registered before CEGA T. One appeal
was preferred by the Company against the decision of the Commissioner
holding that the goods were liable to payment of custom duty and not covered ·.
E by Chapter Heading 4901. Two appeals were filed by Mr. Chand Seth,
Chairman-cum-Managing Director and Mr. Arun Gupta, Director against
payment of penalty of Rs. 50,00,000 and Rs. 25,00,000 respectively. Two
cross appeals were filed by the Department against quantum of penalty
imposed on Mr. Chand Seth and Mr. Arun Gupta contending that the penalty
F imposed by the Commissioner of Customs was inadequate and was required
to be enhanced.

CEGAT took up for consideration all the appeals. It observed that an
identical question come for consideration before a Larger Bench of CEGA T
in Parasrampuria Synthetics Ltd v. Commissioner of Customs, New Delhi,
G (2000) 119 ELT 211 : (2000) 38 RL T 846 (LB). It noted that the Larger
Bench was faced with the issue as to whether the law laid down by a two-
member Bench in Tractors & Farm Equipment Ltd. v. Collector of Customs,
( 1993) 68 EL T 234 was correct or decisions of Coordinate Benches in
Mitutronics v. Collector of Customs, (1990) 46 ELT 500, Rota Inks (P) Ltd. ...
H v. Collector of Customs, (1990) 47 ELT 398, Tata Consultancy Service v.
COMJ\.fR. OF CUSTOMS 1•. GUJARAT PERSTORP ELECTRONICS LTD. [THAKK.ER, J.J 399

Collector of Customs, (1991) 53 ELT 454, Collector of Customs, Madras.v. A
Tata Elxsi India Ltd., (1995) 78 ELT 370, Lakshmi Cement v. Collector of
Customs, New Delhi, (1996) 84 ELT 271, were correct. CEGAT proceeded
to state that after a survey on the entire case law, the Larger Bench in
Parasrampuria Synthetics Ltd took the view that the law laid down by two-
member Bench in Tractors & Farm Equipment Ltd did not lay down correct B
law and accordingly overruled it. The decisions in other cases were correct
and the said view was affirmed. In those decisions, it was held that printed
materials could be said to be "Books" covered under Chapter Heading 4901
and were entitled to full exemption and consequently no duty was leviable
on the goods imported. CEGAT noted that the decision of the Larger Bench
was binding on it. Accordingly, the appeals filed by the Company as well C
as by the Chairman-cum-Managing Director and the Director were allowed
by setting aside the order passed by the Commissioner imposing duty and
penalty. Resultantly, two appeals filed by the Department for enhancement
of penalty on Chairman-cum-Managing Director and Director were dismissed.
D
Against the order passed by CEGAT, the department has filed these
appeals. One of the appeals came up for preliminary hearing before a three
Judge Bench on December 14, 2001. Delay was condoned and appeal was
admitted. Notice was also issued for interim relief. In the meantime, stay
was granted against refund of amount if not already refunded. The interim
order was thereafter continued and hearing was expedited. On May 01, 2003, E
the appeals were placed for hearing before a two Judge Bench and the
following order was passed :

"Heard the learned counsel for the parties.
F
Learned counsel for the appellant submits that the question involved
in these appeals is covered by the decision rendered by this Court
in Commissioner ofCustoms, New Delhi v. Parasrampuria Synthetics
Ltd., (2001) 9 SCC 74 which reveals that the tribunal's judgment
on which the reliance was placed was set aside. As against this, Dr.
A.M. Singhvi, learned senior counsel appearing on behalf of the G
respondent relied upon the decision rendered by this Court in A.C.C.
v. Commercial Tax Officer, [2001] 4 SCC 593.

Considering the aforesaid two decisions, there appears some
conflict in the ratio laid down in both the cases. Hence, these H
400 SUPREME COURT REPORTS (200~] SUPP. 2 S.C.R.

A appeals are referred to a larger Bench.

Registry to place the papers before Hon'ble the Chief Justice
of India for appropriate direction in this regard to placl! it before an
appropriate Bench."
B
That is how the matters were placed before us for final hearing. We
have heard learned counsel for the parties.

At the time of hearing of appeals, the learned counsel for
the appellant stated that three questions arise for consideration of this
c Court:

(i) Whether the goods imported by the Company in the form FEEP
(Front End Eng!neering Package) comprising of technical
documentation, designs and drawings are classifiable under Chapter
sub-heading 4911.99 of the Customs Tariff?
D
(ii) Whether the goods imported by the appellant in the form of
know-how containing latest up-to-date technical data and information
including secret technical knowledge relating to the processes and
their employment to the design, operation and maintenance of the
E plant, are classifiable under Chapter sub-heading 4901.99 of the
Customs Tariff?

(iii) Whether goods, as described in (a) & (b) above, can be
considered as "Printed Book" classifiable under Chapter 49 of the
Customs Tariff in order to avail the benefit of Notification Nos. l 07 I
F
93-Cus and 38/94-Cus?"

It was urged that CEGAT had allowed appeals filed by the Company,
Chairman-cum-Managing Director and Director and dismissed the appeals
filed by the Department solely on the ground that the point was covered by
G a Larger Bench decision of CEGAT in Parasrampuria Synthetics Ltd It
was submitted that the decision of the Larger Bench of CEGA T in
Parasrampuria Synth"!tics Ltd was challenged by the Department in this
Court and this Court in Commissioner ofCustoms, New Delhi v. Parasrampuria
Synthetics Ltd, (2001] 9 SCC 74 :,(;WOl) 133 ELT 9 (SC), set it aside
H allow.ing the appeal filed by the Department. Since the decision of the Larger
COMMR. OF CUSTOMS I'. GUJARAT PERSTORP ELECTRONICS LTD_ [THAKKER,J.J 40}

Bench of CEGA T cannot be said to be a good law in view of the decision A
of this Court referred to above, all the appeals deserve to be allowed by
setting aside the order passed by CEGA T.

The learned counsel for the respondent-Company, on the other hand,
submitted that the view taken by Larger Bench of CEGA T in Parasrampuria B
Synthetics ltd was correct and in accordance with law. It, therefore, could
not have been interfered with by this Court as has been done in an appeal
against the decision and the decision of this Court in Con1n1issioner of
Customs, New Delhi v. Parasrampuria Synthetics "ltd does not lay down
correct law and deserves to be overruled. It was also submitted that in-that
case, this Court did not consider in their proper perspective several decisions C
particularly decisions in Commissioner of /ncon1e Tax, Gujarat v. £/econ
Engineering Company ltd, (1974) 96 ITR 672 (Guj) and of this Court in
Scientific Engineering House Ltd v. CIT, [ 1986] I SCC 11. It was submitted
that though the point was directly covered by an earlier decision of this Court,
a two Judge Bench attempted to distinguish the said case and came to D
incorrect conclusion. It was also submitted that earlier when these appeals
were glaced for hearing, a two Judge Bench was prima facie satisfied that
Parasran1puria Synthetics ltd. was not correctly decided and hence the
matter was referred to a three Judge Bench. It was, therefore, submitted that
the appeals deserv~ to be dismissed by confirming the order passed by
CEGAT. E

Jn the akemative, it was s~bmitted that since CEGAT allowed the

I appeals filed by the Company, Chairman-cum-Managing Director and Director
relying upon a Larger Bench decision in Parasra111puria Synthetics Ltd.
holding that the goods imported by it could be said to be "Books" and hence
were exempted from payment of excise duty, other points though argued and
p

pressed into service at the time of hearing were not considered. It was,
therefore, submitted that in case this Court holds that the contention raised
by the D'epartment is well founded and the order passed by CEGA Tare liable
to be set aside, the matters may be remitted to CEGA T directing it to consider
all the point~ and to decide them in accordance with law. G
The question for consideration before us is whether the goods and
materials imported by the Company in the form of FEEP com prising of
Equipments, Drawings, Designs and Plans are classifiable under Chapter
Heading 49.0I or 49.06 of Schedule I of the Customs Tariff Act, I 975 and H.
402 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A the Company is entitled to the benefit under notification Nos. 107 /93-Cus and
38/94-Cus or they are classifiable under Chapter Heading 4911.99 as
contended by the department.

Before we deal with the actual question, it way be appropriate to refer
to the relevant provisions of law. Section 2 of the Customs Tariff Act, 1975
B declares the rates at which the custom duty is levied under the Customs Act,
1962 as specified in the First and the Second Schedule to the Act. .Chapter
49 of Schedule I deals with "Printed books, newspapers, pictures and other
products of the printing industry, manuscripts, typescripts and plans and reads
as under:
I
c
CHAPTER 49

Printed books, newspapers, pictures and other products of the
printing industry; manuscripts, typescripts and plans

D Notes:

2.

E . 3.

4. Heading No. 49.01 also covers:

(a) A collection of printed reproductions of, for example,
works of art or drawings, with a relative text, put up with
F numbered pages in a form suitable for binding into one
or more volumes;

(b) A pictorial supplement accompanying, and subsidiary
to, a bound volume; and

G (c) Printed parts· of books or booklets, in the form of
assembled or separate sheets or signatures, constituting
the whole or apart of a complete work and designed for
binding.
.
.. ~
'•. H\,' 5.
COMMR. OF CUSTOMS •«GUJARAT PERSTORP ELECTRONICS LTD. [THAKKER, J.] 403

6. A

The relevant headings and sub-headings read thus :

"49.01 Printed books, brochures, leaflets and similar printed
matter, whether or not in single sheets
B
4901.10 In single sheets, whether or
not folded 25%

.. 4901.91 Dictionaries and encyclopedias,
and serial instaments thereof 25%
c
4901.99 Other 25%

49.06 4906.00 Plans and drawings for architectural,
engineering, industrial, commercial,
topographical or similar purposes, D
being originals drawn by hand; hand-written
texts photographic reproductions on
sensitized paper and carbon copies of the
foregoing 25%

49.11 Other printed matters, including printed E
pictures and photographs

49.11.10 Trade advertising material, commercial
catalogues and the like 25%

4911.91 Pictures, designs and photographs 25%
F

4911.99 Other 25%

The relevant notifications are notification Nos. I 07/93-Cus., dated
March 30, 1993 and 38/94-Cus; dated March l, 1994. The relevant part of G
notification No. 107/93-Cus reads as follows;

"Exemption to specified goods of Chapters 49 and 97

In exercise of the powers conferred by sub-section (\) of
section 25 of the Customs Act, 1962 (52 of 1962) and in H
404 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A supersession of the notification of the Government of India in the
Ministry of finance (Department of Revenue) No. 36/93 - Customs,
dated the 28th February, 1993, the Central Government, being
satisfied that it is necessary in the public interest so to do, hereby
exempts goods specified in column (3) of the Table hereto annexed
and falling within the Chapter or under the heading No. of the First
B
Schedule to the Customs Tariff Act, 1975 (51 of 1975), as specified
in the corresponding entry in column (2) of the said Table, when
imported into India, from the whole of the duty of customs leviable
thereon which is specified in the said First Schedule.
•'
c TABLE

S.No. Chapter of Heading No. Description of Goods

1. 49 Printed books (including covers for printed books)

D 2. 49.02 Periodicals (including newspapers).

3. 49.04 Music manuscripts.

4. 49.05 Maps.

E 5. 49.05 Charts

6. 49. 06 Plans, drawings and designs

7. 97.04 Postage stamps, used or if unused not of current or new
issue in the country to which they are destined.
F
8. 97.05 Metals

[Notification No. 107/93-Cus., dated 30.3.1993]

The other notification is notification No. 38/94-Cus., 1st March, 1994.
G It is "General Exemption No. 193B". The relevant part thereof reads as
under:

"Effective rates for specified goods falling within Chapters 40, 41,
43, 44, 47, 48, 49 and 97

H In exercise of the powers conferred by sub-section (1) of section 25
COMMR. OF CUSTOMS r. GUJARAT PERSTORP ELECTRONICS LID. [THAKKER, JJ 405

of the Customs Act, 1962 (52 of 1962), the Central Government, A
being satisfied that it is necessary in the public interest so to do,
hereby exempts goods of the description specified in column (3) of
the Table hereto annexed, and falling within Chapters, heading Nos.
or sub-heading Nos. of the First Schedule to the Customs Tariff Act,
1975 (51 of 1975) as are specified in the corresponding entry in B
column (2) of the said Table, when imported into India, !Tom so
much of the duty of customs leviable thereon which is specified in

.. the said First Schedule, as is in excess of the amount calculated at
the rate specified in the corresponding entry in column (4) of the
said Table, subject to the conditions, if any, laid down in the
corresponding entry in column (5) of the said Table. c
S.No. Chapter/heading No. Description of Rate Condition
Sub-heading No. goods

I. - II
D
12. 49 Printed books (including
covers for printed books) Nil

13. - 19
E
[Notification No. 38/94-Cus., dated 1.3.1994]

Notification No. 25/95Cus. dated 16th March, 1995 is also important.
The relevant part of which reads thus;

"19. EFFECTIVE RA TES OF DUTY FOR GOODS OF VARIOUS F
CHAPTERS/HEADINGS

GENERAL EXEMPTION NO. 121

Effective rates of duty for specified goods of Chapters 40, 41,
44, 47, 48 and 49. In exercise of the powers conferred by sub- G
section (I) of Section 25 of the Customs Act, 1962 (52 of 1962),
the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts goods specified in column
(3) of the Table hereto annexed, and falling within Chapter, heading
No. or sub-heading No. of the First Schedule to the Customs Tariff H
406 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A Act, 1975 (51 of 1975) as are specified in the corresponding entry
in column (2) of the said Table, when imported into India, from so
much of the duty of customs leviable thereon which is specified in
the said First Schedule, as is in excess of the amount calculated at
the rate specified in the corresponding entry in column (4) of the
said Table, subject to the condition, if any laid down in the
B
corresponding entry in column (5) of the said Table.

S.No. Chapter or heading Description of Rate Conditions
No. of sub heading No. goods

c 9.
10. 49. Printed books (including covers NIL
far printed books) and printed _,
manuals including those in
loose-leaf form with binder)
D
11 - 16

It is also appropriate at this stage to refer to Harmonized System· of
Nomenclature (HSN). The relevant part reads thus;

E. "49.01 - PRINTED BOOKS, BROCHURES, LEAFLETS AND
SIMILAR PRINTED MATTER, WHETHER OR NOT IN SINGLE
SHEETS.

4901.10 In single sheets, whether or not folded
F
Other

4901.91 Dictionaries and encyclopedias, and
serial instalments thereof

G 4901.99 Other

This heading covers virtually all publications and printed reading
~atter, illustrated or not with the exception of publicity matter and
products more specifically covered by other headings of the chapter
(particularly) heading 49.02, 49.03 or 49.95. It includes:
H
COMMR. OF CUSTOMS r. GUJARAT PERSTORP ELECTRONICS LID. (TIIAKKER, J.] 407

(A) Books and booklets consisting essentially of textual matter of A
' any kind and printed in any language or characters, including
Braille or shorthand. They include literary works of all kinds,
text books and technical publications: books of reference such
as dictionaries, encyclopaedias and directories; catalogues for
museums and public libraries (but not trade catalogues); B
liturgical books such as prayer books and hymn books (other
than music hymn books of heading 49.04); children's books
(other than children's picture, drawing or colour'ng books of
heading 49.03). Such books may be bound (in paper or with
soft or stiff covers) in one or more volumes, or may be in the
form of printed sheets comprising the whole or a part of the C
complete work and designed for binding.

Dust covers, clasps book-marks and other minor accessories supplied
1

with the books are regarded as forming part of the book.

(B) Brochures, pamphlets and leaflets, whether consisting D
of several sheets of reading matter fastened together
(e.g., stapled), or of unfastened sheets, or even of single sheets.
These include publications such as : shorter scientific theses
and monographs~ instruction notices, etc., issued
by government departments or othf" bodies, tracts, hymn E
sheets. Etc.

(C) Textual matter in the form of sheets for binding in loose
leaf binders.

The heading also covers : F
(\) Newspapers, journals and periodicals bound otherwise than in
paper, and sets of newspapers, journals or periodicals comprising
more than one number under a single cover, whether or not
containing advertising material.
G
(2) Bound picture books (other than children's picture books
of heading 49.03).

(3) A collection of printed reproductions of works ofart, drawings,
etc. with a relative text (for example, a biography of the artist), H
408 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A put up with numbered pages and forming a whole suitable for
binding.

·{4) A pictorial supplement accompanying and subsidiary tQ a
bound volume containing the relative text.

B A question similar to one with which we are concerned came up for
consideration before the authorities in Parasrampuria Synthetics Ltd. The
Central Excise Authorities held that Drawings, Designs and Plans imported
by the Company could not be said to be "Books" within the meaning of
Chapter Heading 49.01 but would be covered under sub-heading 4911.99 and
c hence were liable to cust01~ duty. The demand made by the authority,
therefore, came to be confirmed by the Commissioner of Customs. Being
aggrieved by the order passed by Commissioner, the Company approached
CEGAT. A two member Bench felt that there were conflicting decisions on
the point which could appropriately be resolved by a Larger Bench and
accordingly by an order dated March 14, 2000, the matter was ordered to
D· be placed before the President for constituting a Larger Bench1 As already
observed earlier, the Larger Bench in (2000) 119 ELT 211 decided the
question in favour of a.ssessee and against the Department. Resultantly, the
appeals were allowed by holding that printed materials imported by the
Company could be said to be "Books" falling within Tariff Heading 49.01
E and were entitled to exemption as 'Printed books'.

It was conceded by the Department before us is that no doubt in
Parasrampuria Synthetics Ltd, the Jrarger Bench of CEGA T decided the
question of law in favour of assessee and against the Department, but the
Department had taken the matter further and this Court reversed the decision
F of the Larger Bench in [2001] 9 SCC 74 : (200 I) 123 ELT (SC). It was,
therefore, submitted that the decision of CEGA T impugned in these appeals
deserves to be quashed and set aside by allowing the appeals of the
Department. It was submitted that two appeals have been filed by the
Department for enhancement of penalty imposed by the Commissioner of
G Customs since the penalty was inadequate and required to be enhanced. In
view of the fact, however, that CEGA T aflowed the appeals of the assessee
and quashed the Order in Original passed by the Commissioner of Customs,
the appeals filed by the Department were dismissed. In the light of the
decision of this Court in Parasrampuria Synthetics Ltd. the decision of
CEGA T deserves to be reversed. In that case, both the appeals filed by the
H
COMMR. OFCUSTOM~.,1•. GUJARAT PERSTORP ELEC1RONICS LTD. (THAKK.ER,J.J 409

Department for enhancement of penalty should be allowed. In the alternative, A
they may be remitted to CEGA T for fresh consideration on merits for passing
an appropriate order in accordance with law.

The submission on behalfofthe Company and Chairman-cum-Managing
Director and Director was that the decision of this Court in Parasrampuria
B
Synthetics Ltd. does not lay down correct law. It was submitted that Designs,
Drawings and Plans imported by the Company are covered under Chapter
Heading 49.0l as they could be said to be 'Books' and could not fall under
sub-heading 491 l.99. CEGAT in several cases had taken a similar view. The
Larger Bench also upheld the reasoning in and conclusion arrived at in those
cases. It was also submitted that a similar point came for consideration before c
this Court in Scientific Engineering House Ltd. and this Court in the light
of the provisions of the Income Tax Act, l 96 l, held that drawings and designs
would come within the term 'book' and hence, would be said to be 'plant'.
It was also submitted that the High Court of Gujarat in £/econ Engineering
Ltd considered the question and decided in favour of the assessee. The D
observations of the High Court of Gujarat had been approved by this Court
in Scientific Engineering House Ltd The Division Bench of this Court in
Parasrampuria Synthetics ltd misinterpreted and misapplied the ratio laid
down in that case and erroneously held that the decision in Scientific
Engineering House Ltd. does not support the Company. On the contrary, the
observations in that case supported the case of the Department. It was urged E
by the learned counsel for the assessee that the decision of the Division Bench
in Parasrampuria Synthetics ltd is also not in conformity with the decision
of three Judge Bench in Associated Cement Companies Ltd v. Commissioner
a/Customs, [2001] 4 SCC 593. It was, therefore, submitted that the appeals
deserve to be dismissed. F
So far as CEGA T is concerned, in our opinion, the learned counsel for
the assessee is right in submitting that the point is finally concluded in favour
of assessee and against the Department in Parasrampuria Synthetics Ltd The
Larger Bench observed that in several cases, Drawings, Designs and Plans
were held to be covered under Chapter 49 and would fall under Heading G
49.0 I (Printed books, brochures, leaflets and similar printed matter whether
-,
or not in single sheets); 49.06 (Plans and drawing etc for architecture,
engineering, industrial, commercial, topographical or similar purposes, being
originals drawn by hand; had-written texts; photographic reproductions on
sensitized paper and carbon copies of the foregoing); and 49. l l (other printed H
410 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A matter, including printed pictures and photographs) and not under 4911.99
(other). The Larger Bench also noted that in some cases, a contrary view was
taken. But relying on the majority of the decisions, it was held that the
relevant heading was 49.01 of Schedule I of the Act.

B No doubt this Court in an appeal against the order passed by the Larger
Bench reversed the decision of CEGA T. The question, however, is whether
the order passed by a two Judge Bench in Parasrampuria Synthetics Ltd. Jays
down correct law on the point.

Now, let us consider some decisions on this aspect.
c
In £/econ Engineer Co. Ltd., the High Court Gujarat was called upon
to consider the question whether 'drawings and patterns' acquired by the ,
assessee from foreign company relating to 'know-how' which formed basis
of business of the assessee could be said to be "books" within the meaning
D of sub-section (3) of Section 43 of the Income Tax Act, 1961 and hence,
"plant" as defined in the said sub-section and whether the assessee could
claim depreciation on the said purchase? The High Court noted that sub-
section (3) of Section 43 expressly declared that "book" used for the purpose
of business or profession of the assessee was covered by the inclusive
definition of the word "plant". The question, however, was whether drawings
E and patterns could be said to be "book"? The Court observed that the word
"book" had not been defined in the Act. It was not a term of art. It was an
ordinary English word of every day use and must, therefore, be assigned it!.
natural meaning as understood in the common parlance, subject, of course,
to the context in which. it was used. The Court stated;
F
"We will first consider the question whether drawings and_ patterns
acquired by the assessee are "books'', for the inclusive definition of
the word "plant" in section 43 (3) of the Act expressly declares that
"books" used for the purposes of the business or profession of the
assessee, that is, used for the purpose of enabling the assessee to
G carry on his business or profession and earn income therefrom, are
"plant" within the meaning of section 32. Now, the word "book" has
not been defined in the Act and it is not a term of art. It is an ordinary
)
English word of everyday use and it must, therefore, be assigned its
natural meaning as understood in common parlance subject, of
H course, to the context in which it is used here."
COMMR. OF CUSTOMS 1-. GUJARAT PERSTORPELECTRONICS LTD. [lllAKKER, J.] 411

In popular sense, "book" means a collection of a number of leaves or A
sheets of paper or of other substance, ·blank, written or printed, of any size,
shape and value, held together along one of the edges so as to form a material
whole and protected on the front and back with a cover of more or less
durable material. The Court also referred to dictionary meaning. It was
observed that one must refer not only to the physical, but also functional B
characteristic of "book". It must be functionally useful for the purpose of
assessee's business or profession. To put it differently, it must be a tool of
his trade-an article which must be part of the apparatus with which his
business or profession was carried on. It must have utility value enabling its
owner to pursue his business or profession .with greater advantage. It must,
thus, satisfy a dual test. It must bear both physical and functional characteristics C
of a book. It must be a collection of a number of sheets of paper or of other
substance, having suitable size, shape and value, bound together at one edge
so as to form a material whole and protected on the front and back with covers
of some kind and· functionally useful to the assessee for carrying on his
business or profession.
D
The Court also referred to English decisions on the point. A reference
may be made in this connection to a decision of Court of Chancery in
Pretyman v. Pretyman, (1931) I Ch 521. The testator in that case had by his
will inter alia bequeathed "all the pictures, prints, statues, sculptures, articles
ofvertu books, furniture and plate" to his trustees. The estate of the testator E
included 155 original manuscripts of the series of letters and papers known
as Paston letters. Those letters and papers were not in the form of loose sheets
included in portfolios or kept in a safe. They were mounted, or inlaid in sheets
of paper and bound up in three volumes. The question before the Court was
whether those three volumes could be said to be "articles of vertu" or "book" F
within the meaning of the relevant statute.

Replying the question in affirmative, Maugham, J. stated;

"To my mind .it is plain that a book is not necessarily a printed
G
- book. But in addition,. according to the ordinary meaning of the
English word 'book'. There are many books which are not necessarily
the sort of books which one finds in a library at all, and which yet
are booh. I might mention as an example the book which I have
before m·e, a judge's notebook. I do not know how that could be
described otherwise than as a book." H
412 ~UPREMECOURT REPORTS (2005] SUPP. 2 S.C.R.

A Referring to earlier decisions, the Court concluded;

"In the present case I have come to the conclusion that these
three volumes are books. The factors leading me to that conclusion
are these : The volumes are in book form; to the outward eye they
look like books, and in the ordinary course they can be, and are,
B handled like books. Next, I observe that they can be used like books,
in the sense that, as one turns over the sheets, one can, if able to
decipher the handwriting, read the various letters as a collection of
letters bound up in the books. I observe further that they are not
detachable letters in the ordinary sense, but have been so inserted
c in the sheets that they are in substance permanent parts of the
volumes, unless, indeed, they should be cut out or removed by some
forcible effect."

A similar question came up for consideration before this Court in
Scientific Engineering House Ltd. referred to above. In that case, the assessee
D entered into collaboration agreement for manufacture of scientific instruments.
The collaborator was to supply technical know-how by drawings, designs,
charts, plants, etc. The question was whether those documents in the form
of "documentation service" under the agreement could be said to be 'book'
and 'plant' within the meaning of the Income Tax Act and whether the
E assessee was entitled to claim depreciation? The Court considered two
questions; viz. (i) whether the 'documentation service' agreed to be and
actually rendered by the foreign collaborator to the assessee was incidental
to other services as a result whereof the assessee acquired technical know-
how requisite for the purpose of manufacturing its products; and (ii) whether
the expenditure could be said to be of a capital nature brought into existence
F a depreciable asset?

Considering the provisions of Sections 32 and 43 of the Act, the Court
held that the word 'plant' would im~Jude any article or object fixed or
movable, live or dead, used by a businessman for carrying on his business
G and it is not necessarily confined to an apparatus which is used for mechanical
operations or processes or is employed in mechanical or industrial business.

The Court quoted with approval the following passage of Lindley, L.J.
in Yarmouth v. France, (1887) 19 QBD 647:

H "There is no definition of 'plant' in the Act : but, in its ordinary
COMMR. OF CUSTOMS 1·. GUJARAT PERSTORP ELECTRONICS LTD. [THAKKER, J.] 413

sense, it includes whatever apparatus is used by a businessman for A
carrying on his business, - not his stock-in-trade which he buys or
makes for sale ; but all goods and chattels, fixed or movable, live
or dead, which he keeps for permanent employment in his business."

The Court also referred to functional test formulated by Lord Guest in
B
Inland R<CVenue Commissioners v. Barclay Curle & Co. Ltd, (1970) 76 !TR
62 (HL):

"In order to decide whether a particular subject is an 'apparatus'
it seems obvious that an inquiry has to be made as to what operation
it performs. The functional test is, therefore, essential at any rate as C
a preliminary."

• The Court then formulated the test thus;

"Does the article fulfill the function of a plant in the assessee's
trading activity? Is it a tool of his trade with which he carries on D
his business? If the answer is in the affirmative it will be a plant."

The Court proceeded to observe that applying the said test, the
drawings, designs, charts, plans, processing data and other literature comprised
in the 'documentation service' specified in the agreement would constitute E
'book' and hence 'plant' within the meaning of the Act. The Court, therefore,
held that it was clearly of the opinion that the capital asset acquired by the
assessee, namely, the technical know-how in the shape of drawings, designs,
charts, plans, p_rocessing data and other literature fell within the connotation
'plant' and, therefore, a depreciable asset. The Court referred to £/econ
Engineering Co. ltd and said; F
"Counsel invited our attention to the decision in CIT v. £/econ
Engg. Co. Ltd. where the Gujarat High court has, after exhaustively
reviewing the case law on the topic, held that drawings and patterns
which constitute know-how and are fundamental to the assessee's
G
manufacturing business are 'plant'. we agree and approve the said
view".
(emphasis supplied)

It is, no doubt, true that in Parasrampuria Synthetics Ltd, a two Judge
Bench of this Court reversed the decision of CEGA T and held that Drawings, H
414 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A Designs and Plans imported by the assessee from Zimmer under an agreement
for transfer of technology for setting up a plant to manufacture specified
goods could not be said to be 'book' and hence was not covered by Chapter
Heading 49.01 nor exempted under notification 'of 1975. .It. is also true that
the Court considered both the decisions, viz., Scientific Engineering House
B Ltd decided by this Court and £/econ Engineering Co. Ltd. decided by the
High Court of Gujarat.

, Regarding Scientific Engineering House Ltd., a two Judge Bench said;

"While there is some factual divergence as noticed above but
c the factum of the drawings etc. not fonning part of a book within
the exemption notification stands accepted in Scientific Engg. as
would be evident from the emphasized portion in para I3 noticed
above. In this view of the matter, the aforesaid decision of this Court
in Scientific Engg. does not lend any assistance to the assessee,
D rather runs counter to the respondent's contentions. As can be seen
from one of the volumes produced before us, it contains documents
in loose sheets merely put up in a folder. It has none of the
characteristics of a book known in the common trade parlance. At
any rate, the principal interest in the goods is related to transfer of
technology to the assessee in the fonn .of drawings, designs and
E plans for setting up a plant to manufacture polyster, polyster
filament yam and polyester staple fibre ..Thus. viewed fr:om any
ang!e, the goods imported by the assessee are, not covered by
SI.No. I 0 but are covered by SI.·. No.. l.5 of.
;the. s~id ,e~emption
, '.

notification."
F
The Court proceeded to observe; ..
··

"The question thus arises as to whether articles imported satisfy
the requirement of Serial No. I 0 of the notification. Incidentally, this
Court in Scientific Engg. categoric.ally, posed a .questi9n as to
G
I • - •• • ,

whether apart from the physical fonn, ,th~ .dQcuments satisfy the
functional test! The basic issue thus wou~~(p~ t!i~ i:iatiife of articles
imported. Now what these documents are : admittedly in tenns of
the agreement between the parties, these. dQc~e~ts <,:annot be
attributed to be technical know-how in the shape of drawings,
H designs, plans and other literature: it is a literature or specification
COMMR. OF CUSTOMS 1•. GUJARAT PERSTORP ELECTRONICS LTD. [THAKKER. J.] 415

for a particular plant to manufacture polyester, polyester filament A
yarn and polyester staple fibre : even without adverting to the
general trade parlance of the word "book" and its known features
a plain look at the book itself denotes it to be an installation and
planning manual. The documents though loosely kept in a binder
is known as Zimmer Documentation as regards the Fisher-Fosemount B
Systems. It is a technology transfer agreement which stands
documented in a folder. The heading itself records "Installing CHIP

.. Products and Application Software". The heading itself thus indicative
of not being a work of art by an author-it is a record of scientific
progress achieved and this particular achievement is being transferred
by way of transfer of technology agreement between the two parties C
and thus cannot but be termed to be a "technical know-how in the
shape of drawings, designs, charts, plans and other literature"-
these items have been ascribed to be a part of the plant for the
purposes of depreciation allowance in terms of Sections 32 and
. 43(3) of the Income Tax Act. Merely by reason of the factum of D
certain writings on various sheets of paper, one cannot ascribe the
documentation to be a "book". The word "book" has not been
defined in the Act but the "book" in common acceptation is a literary
composition from which one may extend or advance his or her
knowledge and learning."
E
As to Elecon Engineering Co. ltd, it was stated;

"Incidentally, the decision of the High Court of Gujarat in the
case of C!Tv. Elecon Engg. Co. ltd. has been strongly relied upon
by the Tribunal and it has also been recorded in the order impugned
F
that the decision was subsequently approved by this Court .. While
it is true that Elecon Engg. stands approved by this Court but para.
14 in the decision in Scientific Engg. would make the situation clear
enough tu indicate that the same does not convey what the learned
Tribunal wanted to convey."
G
The learned counsel for the assessee, however, is right in submitting that
a Bench of two Judges proceeded on the basis of submission on behalf of
the Revenue by the learned Attorney General wherein he. contended that a
book must certain features. This is clear if one reads paragraph l 0 of the
Report, which reads thus; H
416 SUPREME COURT ~PORTS [2005) SUPP. 2 S.C.R.

A "Turning attention on to Serial No. 10, be it noted that in
Chapter 49 "printed books" and "printed manuals" including those
in loose-leaf form with binder, have been specifically referred to as
"nil" duty article. It is in this context that the learned Attomey-
General in support of the appeal contended that in general trade
B parlance a book is known by features like (i) a bo?k has an author,
(ii) a book has a publisher, (iii) a book is a priced publication, (iv)
the book is available to all and sundry who pay for it, (v) the book
does not have a memorandum of understanding, (vi) there is no
confidentiality about the book, (vii) a book has a subject to deal,
with, (viii) the pages are serially numbered and neatly bound, and
c (iv) last but not the least, it should have ISBN Code i.e. International
Standard Book Number."

Our attention was also invited by the learned counsel to dictionary
.
meaning of the word 'Book'.
D
In the Penguin English Dictionary, it is stated;

"Book is a set of written, printed, or blank sheets bound
together into a volume."

E The Concise Oxford Dictionary, defines 'book' as "a written or printed
work consisting of pages glued or sewn together along one side and bound
in covers; a main division of a literary work or of the Bible; a set of records
or accounts; a book maker's record of bets accepted and money paid out;
a set of tickets, stamps, matches, etc. bound together. ... "
F
According to the New Webster's Dictionary,

'Book' means "A writing or document; a written or printed
work of some length, as a treatise or other literary composition, esp.
on sheets fastened or bound together; a volume; cap. the Bible. A
G libretto; a division of a literary work, esp. one of the larger divisions;
a record of bets, as on a horse-race; any collection of sheets fastened
or bound together; a number of sheets bound together and used for
making entries, as of commercial transactions; a pile or package of
leaves, as of tobacco; a trick at cards, or a number of cards fo1111ing
a set; bridge, six tricks taken by one side."
COMMR. Of CUSTOMS r. GUJARAT PERSTORP ELECTRONICS LTD. [THAKKER, J.J 417

According to Words a11d Phrases (Pennanent Edition), "A "book", in A
its popular sense, is understood to be a volume, bound or unbound, written
or printed."

In our opinion, the counsel is right in submitting that when the
expression 'book' is not defined in the Act, natural and ordinary meaning B
of the said expression must be kept in view. According to him, nowhere it
is provided that all the nine characteristics or ingredients as highlighted by
the learned Attorney General in Parasrampuria Synthetics ltd and referred
to by this Court in paragraph I 0 must be considered essential or sine qua
non. He, therefore, submitted that a wrong test was applied by this Court in
Parasrampuria Synthetics ltd and Scientific Engineering House ltd was C
erroneously distinguished. The proper way on the part of the Court was to
consider the test laid down in Scientific Engineering House Ltd and to come
to a conclusion whether on the facts and in the circumstances of the case,
Drawings, Designs and Plans in the case on hand could be said to be 'book'.
By not doing so, a clear error of law had been committed and the decision D
deserves to be overruled.

It was also submitted that so far as factual aspect is concerned, CEGA T
was right in holding that Drawings, Designs and Plans imported by the
assessee were covered by Tariff Heading 49.01 and were also entitled to
exemption under notifications No. 107/93-Cus and 38/94-Cus. Alternatively, E
it was submitted that if this Court is of the view that CEGAT has not entered
into the said question in view of the Larger Bench decision, the matter may
be remitted to CEGA T directing it to consider the case afresh by applying
correct test and to take an appropriate decision.
F
The learned counsel for the Revenue submitted that £/econ Engineers
Ltd and Scientific Engineering Housing Ltd were rendered in different
context. The basic issue was-whether 'books' were covered by the entry
'plant' under the Income Tax Act. Those decisions, therefore, have no
relevance to the issue in question since the entries are different. It was also
submitted that since the article in question was to be used by the assessee G
and was prepared according to his requirement, it had no utility to others.
Hence, it cannot be said to be a 'book' in general sense. It was argued that
this Court has considered the factual position in Parasrampuria Synthetic.r
Ltd. and held that the article was not a book. It would not, therefore, be
appropriate to hold otherwise in the present case. H
,.

418 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A In our opinion, all these questions have to be considered and decided
by the CEGAT in the fact-situation of the case in hand. As already noted by
us, some of the tests applied in Parasrampuria Synthetics Ltd. were not
relevant and appropriate. The CEGAT will now consider the ratio in
Parasrampuria Synthetics Ltd. in the light of the observations made by us
B in this judgment and decide the issue raised in the instant case.

The matter could be looked at from another angle also. As noted earlier,
HSN has dealt with the point and as per Explanatory Note, it would fall under
Chapter Heading 49.0l. If it is so, it would not be covered by sub-heading
4911.99.
c
!n this connection, we may refer to a three-Judge Bench decision of this
Court in Collector of Central Excise, Shillong v. Wood Craft Products Ltd.,
[1995] 3 SCC 454 : (1995) 77 EL T 23 (SC). The Court, in that case,
considered the question whether 'plywood' was classifiable under sub-
D heading 4408.90 or sub-heading 4410.90? HSN Explanatory Notes was
considered by this Court and it was observed;

"We are of the view that the Tribunal as well as the High Court fell
into the error of overlooking the fact that the structure of the Central
excise tariff is based on the internationally accepted nomenclature
E found in the HSN and, therefore, any dispute relating to tariff
classification must, as far as possible, be resolved with reference to
the nomenclature indicated by the HSN unless there be an express
different intention indicated by the Central Excise Tariff Act, 1985
itself. The definition of a term in the ISi Glossary, which has a
F different purpose, cannot in case of a conflict, override the clear
indication of .the meaning of an identical expression in the same
context in the HSN. In the HSN, block board is included within the
meaning of the expression "similar laminated wood" in the same
context of classification of block board. Since the Central Excise
Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the
G same expression used in the Act must, as far as practicable, be
construed to have the meaning which is expressly given to it in the
HSN when there is no indication in the Indian tariff of a different
intention."

H The ratio laid down in Wood Craft Products Ltd. was followed and
COMMR. OF CUSTOMS 1•. GUJARAT PERSTORP ELECTRONICS LTD. [IBAKKER, J.] 419

reiterated in Collector of Central Excise, Hyderabad v. Backelite Hy/am Ltd, A
(1997] 10 SCC 350: (1997) 91 ELT 13 (SC) and in Collector of Customs,
Bombay v. Business Forms ltd Thr. O.L., (2002) 142 ELT 18 (SC). Hence,
even that aspect has to be considered and kept in mind while deciding as to
whether Drawings, Designs and Plans could or could not be said to be
'printed book' covered by Chapter Heading 49.01, 49.06 or sub-heading B
4911.99?

There is still one more aspect which is relevant. It cannot be disputed
and is not disputed before us and is also concluded by a decision of a three-
Judge Bench in Associated Cement Co. Ltd that the basic heading is 49.01.
It deals with "Printed books, brochures, leaflets and similar printed matter, C
whether or not in single sheets". 49.l l covers "Other printed matter,
including printed pictures and photographs". Thus, specific or basic heading
is 49.01 and residual entry is 49.1 I. Priority, therefore, has to be given to
the main entry and not the residual entry. According to the Company, the
case is covered by the main entry under 49.01, and in that view of the matter, D
one cannot consider the residual entry 49.11.

In Indian Metals & Ferro Alloys ltd, Cu/tack v. Collector of Central
Excise, Bhubaneshwar, [1991] Supp l SCC 125, this Court held that
residuary item can be referred to and such item can be applied only when
goods are shown to be not falling under any other spe~ific item. If they are E
covered by a spec_ific itemi residuary item has no application.

The Court stated;

"One more aspect of the issue should be adverted to before we
conclude. The assessee is relying upon a specific entry in the tariff F
schedule while the department seeks to bring the goods to charge
under the residuary Item 68. It is a settled principle that unless the
department can establish that the goods in question can, by no
conceivable process of reasoning, be brought under any of the
specific items mentioned in the tariff, resort cannot be had to the G
residuary item .... " [See also Bharat Forge & Press Industries v.
Commissioner of Central Excise, [1990] 1 SCC 532 : (J 990) 45 EL T
525 (sc)]

In our considered opinion, all these contentions raised by the assessee
have to be dealt with and decided in the light of relevant statutory provisions H
420 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A of the Act and the Rules as also on the basis of decided cases on the point.
As CEGA T has disposed of all the appeals merely on the basis of Larger
bench decision in Parasrampuria Synthetics Ltd. and has not considered rival
contentions on merits nor recorded findings thereon, it would be appropriate
and in the fitness of things to remit the matters to CEGAT, now to Customs,
B Excise and Service Tax Appellate Tribunal (CESTAT) to decide them on ah
points in accordance with law in the light of observations made in this
judgment.

For the foregoing reasons, all the appeals are allowed. The order passed
by CEGA T is hereby set aside and the matter is remitted to CESTAT for
C reconsideration and for passing fresh order in accordance with law. In the
facts and circumstances of the case, however, there shall be no order as to
costs.

A.Q. Appeals allowed.