The Supreme Court of India,India in a recently came up with the Judgment of M/s Gammon India Ltd.

v/s Commissioner of Customs, Mumbai. The case pertains to availability/eligibility of customs exemption on import of goods by a partner of the joint venture (JV) on behalf of the JV.
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refused to grant benefit of Exemption notification

No. 17/2001-Cus dated 1 March, 2001 (Exemption Notification). The said notification was passed by the Customs Department. Under this notification, full exemption was granted from basic customs duty and additional customs duty on specified goods. One of the condition precedent for availing the said exemptions being, goods procured needed to be used for construction of roads.dealt with the issue of availment of an end-use based exemption by a consortium, acting in concert for execution of a project in the form of an unincorporated joint venture. The case also deals with appropriate definition of the term person with respect to an entity who had been awarded contract for construction of the roads in India Besides, the case also makes a distinction between a Joint Venture (JV) and a partner of a JV (Partner) as an independent entity. The dispute in the present case revolves around whether import of machinery called," Concrete batching plant 56 cum/hr" (Equipment) by a Partner can be considered as an import by the JV. The Supreme Court held that import of Equipment by a Partner cannot be considered as an import by, a person who had been awarded contract for construction of the roads in India and therefore, The appellant namely M/s Gammon India Ltd. (Gammon) does not fulfill the requisite requirement stipulated in Condition No. 38 of the Notification. Facts of the Case y The appellant namely M/s Gammon India Ltd. (Gammon) and one M/s Atlanta Infrastructure Ltd., Mumbai (Atlanta) entered into a JV agreement on September 18, 2000. The JV was named as Gammon Atlanta JV. y On March 1, 2001, in exercise of the powers conferred by Section 25(1) of the Customs Act, 1962, the Central Government issued issued Notification No. 17/2000 Cus the aforesaid (Exemption Notification), inter alia, exempting the goods subject to certain conditions enumerated therein.inter alia, the condition that the goods are to be imported by a person who has been awarded a contract for the construction of roads and certification that the goods would be used exclusively for road construction. y The appellant approached NHAI for issue of the end-use certificate, as contemplated in para (c) of Condition no. 38, of the Exemption Notification for import of "Concrete batching plant 56 cum/hr" (Equipment)equipment covered under the said Exemption Notification. NHAI forwarded a certificate issued by the ministry of Road Transport and Highways, addressed to the Assistant Commissioner of Customs, Mumbai certifying that the said equipment Equipment was required for construction of roads and recommending its duty free import. y Equipped withBasis the said certificate, Gammon imported specified the Equipment for clearance at nil rate of duty under Exemption Notification. y Deputy Commissioner of Customs rejected the exemption claim from the appellant on the ground that exemption claim could only be allowed if goods the Equipment are was imported by a person who has been awarded the contract whereas in the present case goods were imported by Gammon.

Issue

The question for determination is whether import of the Equipment by Gammon can be considered to be an import by a person who has been awarded a contract for construction of roads in India, so as to fulfill Condition No. 38, laid down in Exemption Notification No. 17/2001/ Cus dated March 1, 2001.
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Status before the Commissioner of Customs y Appellant preferred an appeal to the Commissioner of Customs. Commissioner ruled in favour of the appellant stating that the appellant is not an outsider to the contract and therefore denial of benefit of said notification is not warranted. y Revenue appealed against the matter before the Tribunal.

Position before the Tribunal y Tribunal had come to the conclusion that the benefit of Exemption Notification cannot be availed even by a Joint Venture because it is nothing more than an association of two persons having no identity in law. The department would therefore be justified in rejecting the claim for exemption on the ground that identity of the real importer was not known. y The Tribunal distinguished the case of New Horizons Limited v. Union of India (1995) 1 SCC 478 relied on behalf of the importer. Contention of the appellants y JV is a legal entity with all the trappings of a partnership under the Indian Partnership Act, 1932. Therefore the general principles of the said act would also be applicable to the JV. y Applying the above principle any partner of a JV shall be competent to import equipments on behalf the contractor, i.e. the JV. y The Export Import policy for the years 1997-2002, provides for an inclusive definition of the term legal person, as per which, an import of Equipment by the appellant for and on behalf of the JV is as good as import of Equipment by the JV. y The JV had been awarded the contract for construction of roads, conditions for exemption were under Condition No. 38 of the Exemption Notification were satisfied. Since Gammon has been importing goods on behalf of the JV, the same should also be considered to be satisfying the conditions for exemption. y In this regard two cases with similar fact situations were sited supporting the appellants claim, they being: IVRCL Infrastructures & Projects Ltd. v. C.C. Chennai (Sea) 2004 (166) and Techini Bharathi Ltd. v. Commissioner of Customs, Mumbai-II 2006 (198) E.L.T 33. In these cases, Wwhen machinery for road project was imported by one of the constituents of the joint venture, the benefit of the same Exemption Notification had been granted by the Tribunal. y It was argued that the said orders of the Tribunal having been accepted by the revenueRevenue, it cannot be permitted to take a different stand on the same point in case of the appellant.

Appellants also cited the case of Commissioner of Customs (Preventive), Mumbai v. M. Ambalal & Co. (2011) 2 SCC 74 while submitting that a beneficial and promotional exemption notification has to be construed liberally.

Contention of the Revenue y The JV and Gammon India are two independent entities. Eligibility certificate granted to Gammon would therefore have no bearing as far as the Exemption Notification is concerned since the contract for construction of road was given to the JV and not Gammon. y It was stressed that Gammon, on their own, were not entitled to import any goods for the execution of road works under the contract awarded to the JV by NHAI Judgment of the Supreme Court The Supreme Court held that import of Equipment by one of the partners of an unincorporated joint venture in the individual name of that partner cannot be considered as an import by, a person who had been awarded contract for construction of the roads in India and therefore, Gammon does not fulfill the requisite requirement stipulated in Condition No. 38 of the Exemption Notification. On Ddistinction from the earlier decision in the case of New Horizons (Supra) y New Horizons case was cited by the appellants in order to support the argument that a joint venture is a legal entity in the nature of a partnership of the constituent companies. Therefore applying New Horizons it could be contended that M/S Gammon-Atlanta JV could be treated as a legal entity, with the character of a partnership Gammon could be treated as a constituent. y The argument that emerges out of new New horizons Horizons squarely falls within the ambit of this casedecision was held to be factually distinguishable. It was held that Tthe present case completely turns around the factual position that the appellant at no stage brought out the fact either vide documentary proof or by any other method that the import of Equipment was by or on behalf of the Gammon-Atlanta Joint joint Ventureventure as opposed to Gammon on its own. On Cconstruction of taxing statute y It is indeed a correct principle of law that in case of ambiguity, a taxing statute should be construed in favour of the assessee. y However, without prejudice to the principle stated above, the same does not apply to construction of an exception or an exempting provision. Such provisions have to be interpreted strictly. y A construction of an exception or an exemption provision to relieve oneself from the tax liability must establish clearly that he is covered by the said provision. In case of a doubt or ambiguity, the benefit must always go to the state.
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Application of the principles and judicial precedents to the facts of the present caseOther observations

The language of the Exemption Notification is clear and unambiguous; there is no need to resort to the interpretative process in order to determine whether the said condition is to be imparted strict or liberal construction. Supreme Court differed completely from and raised concern on the decision of the two benches of the tribunal deciding appeals in the cases of IVRCL Infrastructures Projects Ltd (Supra), and Techni Bharati Ltd (Supra), referred to by the appellants. As per the Supreme Court, the view taken by the tribunals in these two cases were totally contrary to the view taken by an earlier judgment. This created a judicial uncertainty with regard to the declaration of law on identical issue in respect to the same Exemption Notification. If a Bench or a tribunal wishes to take a view different from the one taken by the earlier Bench, the propriety demands that it should place the matter before the President of the Tribunal so that the case is referred to a larger Bench, for which provision exists in the Act itself.

Concluding Remarks of the Supreme Court In view of the above observations, The Supreme Court held that the decision of the appellant was not entitled to the benefit of Exemption Notification No. 17/2001-Cus dated March 1, 2001. BMR Comments y Prior to this case, there was an uncertainty with respect to the JVs, in the sense whether a partner can be
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considered to be an import by a person who has been awarded a contract for construction of the roads in India. Cases like IVRCL Infrastructures & Projects Ltd. v. C.C. Chennai (Sea) 2004 (166) and Techini Bharathi Ltd. v. Commissioner of Customs, Mumbai-II 2006 (198) E.L.T 33. Have held that import of machinery by a Partner of a JV on behalf of a JV is as good as import by a JV and once import of machinery by a JV is exempted, the same can be availed by a Partner as well.
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y The Supreme Court in this case was however clearly dissatisfied with the observations made by the CESTAT tribunal in these two cases considering the fact that these two tribunals completely ignored a decision of a co-ordinate bench. The Apex court suggested that since a contrary judgment already exists on an identical issue, the Tribunal should have referred the matter to a larger Bench.

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The case could also be said to be turned down on facts to a certain extent, because, the Supreme Court noted that the appellant failed to prove that the Equipments for construction of roads in India were imported by the JV which was the specific requirement for availment of exemption under the Exemption Notification. Further the court refused to adopt a liberal interpretation approach while interpreting an exemption clause in this case. This decision is a very fact specific one and thus it may still be possible to take a position that availment of an enduse based exemption would be possible even for imports by one of the members of a consortium (in the form of an unincorporated joint venture) , acting in concert for execution of a project, as long as it could be proved that the imports were on behalf of the said consortium. This decision may necessitate a review of import processes adopted/proposed to be adopted by the various consortia (in the form of unincorporated joint ventures) across the country which are brought into existence for execution of

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various projects. Import/customs clearance related provisions in the underlying contract documents may also merit a re-look in the light of this decision.
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