1. The basic issue involved in this appeal is whether machinery and components etc. imported by the appellants for modernisation of their cement plant were entitled to be assessed under heading 84.66 of the Customs Tariff Act, 1975 or not. In order to facilitate a proper understanding of the matter, we reproduce the text of heading 84.66 in the Annexure to this order.

2. The case was argued before us at length on 25th February, 1983 and again from 16th March to 18th March, 1983. The appellants attacked the impugned order of the Additional Collector (hereinafter referred to as the "Collector") on the following grounds :-

(1) The Collector has held against the appellants in his order on four counts-

(i) Delay in registration of the contract on the part of the appellants,

(ii) Failure on the part of the appellants to produce the endorsement of the licensing authority on the import licence, or a Recommendatory Letter, to the effect that the goods to be imported under the said licence were entitled to the benefit of Project Imports,

(iii) Suppression by the appellants of the fact that the imports in question were not for initial setting up of a unit or for substantial expansion of an existing unit but were for modernisation and replacement only, and

(iv) Ineligibility of the appellants to the benefit of heading 84.66 since this heading was confined to Project Imports for initial setting up of a unit or substantial expansion of an existing unit while it was ultimately found that the imports in question were not for this purpose but were for modernisation and replacement of the appellants' existing cement plant.

As regards delay in registration, Regulation 3(2) of the Project Imports (Registration of Contract) Regulations, 1965 requires that an importer intending to avail of the benefit of assessment under heading 84.66 should apply for registration of his contract as soon as he has obtained the import licence. The appellants argued that no doubt they applied for registration, on 11-6-82 after about one year of obtaining the licence, but the fact was that the Collector called for their explanation for this delay which they furnished in detail in their letter dated 25-6-82 whereupon the Collector granted their request for registration of the contract on 5-7-82. The only reasonable presumption that could be drawn from this was that the Collector had accepted their explanation for delay and he was, therefore, not justified in making the aforesaid delay a ground for revoking the registration later. In any case, the delay was not of a material character since all clearances under the contract took place only after the contract had been registered and thus the requirement of the Proviso to heading 84.66 stood compiled with.

(2) Regarding their failure to produce the Project Import endorsement on their import licence or a Recommendatory Letter to that effect, the appellants stated that there was no statutory obligation on their part to do so. Para 177 of the Hand Book on Import Trade Control Policy was only of a recommendatory nature. Hence, this failure on their part cannot be a ground for cancelling the registration.

(3) The show cause notice issued by the Collector contained no allegation that the appellants had suppressed any fact. It was, therefore, unfair on the part of the Collector to suddenly bring this charge against them in his impugned order. The appellants emphatically denied that they had suppressed any facts. The subject heading in their application for registration as well as in their subsequent letters in that connection stated clearly that the imports were for the purpose of modernisation. Further, with their application dated 11-6-82, they enclosed their industrial licence which showed their existing capacity as 2,600 tonnes per day. They also enclosed a copy of the contract which showed that after modernisation the revised capacity would stand at 2,500 tonnes per day. Had the Collector cared to read these documents careful