Custom, Excise & Service Tax Tribunal
Kandla vs Pmc Projects India Pvt Ltd on 25 April, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
REGIONAL BENCH -COURT NO. 03
Custom Appeal No. 12645 of 2014
[Arising out of OIA-211-2014-CUS-COMMR-A--KDL passed by Commissioner of CUSTOMS-
KANDLA]
C.C.- Kandla ......Appellant
Custom House, Near Balaji Temple, Kandla
VERSUS
M/s PMC Project India Pvt. Ltd. .....Respondent
AIIM, At Shantigram, Nr. Vaishnavdevi Circle, SG Highway, Ahmedabad APPEARANCE:
Shri. T.G. Rathood, Authorized Representative for the Appellant Shri. Hardik Modh & Sh. V.S. Nankani Advocate for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) FINAL ORDER NO. A/ 10710 /2019 DATE OF HEARING: 26.12.2018 DATE OF DECISION: 25.04.2019 PER: RAMESH NAIR The present appeal has been filed by the Revenue against Order-in- Appeal No. 211/2014/CUS/COMMR(A)/KDL dated 21.3.2014 passed by Commissioner (Appeals), Kandla. The brief facts of the case are that the Respondents M/s PMC Projects (India) Pvt Ltd, Ahmedabad had imported consignment of Insulating Oil First Filing, Insulating Oil (Nitro Gemin X), Surge Arrester & Surge Arrester including serge counter, Bushing, Buchhoiz Relay, Valves for Cooling Bank, Gate, Butterfly, Pressure Relief device, Oil Temperature Indicator, Bushing CT, MCB, MCCB Gauge, Breather, Gasket / ‗O' Ring Gasket, Neutral rounding Reactor, Lifting Jack, Shackle, Open Ended Spanner, Adjustable Wrench, Rigid Heavy duty pipe wrench, Heavy duty Lever Chain, Socket wrench, Torque Wrench, C-Clamp, Manila rope, Wire Rope, 745 KV & 145 KV Bushing, 500 NVA 765/400 KVA, Single phase Auto Transformer, Local control panel, Hydran M2, 80 MVAR 765 KV, single phase Auto Transformer, Local control panel, Hydran M2, 80 MVAR 765 KV Singe Phase Bus Reactor,120 KN & 210 KN Toughened Glass Disc Insulator at Custom House - MP & SEZ, Mundra. The goods were cleared by filing
2|Page C/12645/2014-DB B/E No. 6186246 dated 6.3.12, 6186247 dated 6.3.12, 6130149 dated 29.2.12, 6130148 dated 29.2.12, 6186248 dated 6.3.12, 6118467 dated 28.2.12, 6257843 dated 4.3.12, 6257846 dated 14.3.12, 6118400 dated 28.2.12 and 6225685 dated 12.3.12 with claim for benefits of Project Import against the Contract No. MEGPTCL/PMC/AD/03/10 dated 27.09.2010 made with M/s Maharashtra Eastern Grid Power Transmission Co Ltd.
2. The supply of goods imported by the claimant were stated to have been recommended by the Principal (Energy), Government of Maharashtra, Energy Industries and Labour Deptt. Mantralaya, Mumbai vide recommendation letter No. CUM-2011/CR 452/NRG-4 dated 8.12.2011 No. CUM-2011/CR 359/NRG-4 dt 21.10.2011, CUM-2011/CR 394/NRG-4 dated 31.10.2011 & Cl-2011/CR 453 /NRG-4 dated 8.12.2011. As per the recommendation letter, buyer was setting up a 765 KV & 400 KV substations including all equipments, Auto Transformers and Reactors associated with 765 KV Tiroda - Karadi III - Akola II - Aurangabad Transmission System in Maharashtra. The contract dated 27.9.2010 made by the Respondent with the buyer was registered by M/s Maharashtra Eastern Grid Power Transmission Co. Ltd with the Custom House, Kandla vide Registration Letter No. S/42- 38/MEGPTEL-Projects/Gr.VI/2011 dated 01.11.2011 issued by the Assistant Commissioner of Customs, Customs House, Kandla.
3. The imported goods were granted benefits of Project Import and were imported by the Respondent inclusive of SAD / CVD. They later filed claim for refund of 4% SAD /CVD on the imported goods under the provisions of Notification No. 102/2007-CUS dated 14.9.2007 on the ground that they have paid VAT / CST on such imported goods. The refund claim for the amount of Rs.15,82,53,825/- was sanctioned to them vide OIO dated 28.05.2013. The Revenue against such sanction of refund filed appeal before the Commissioner (Appeals), Kandla, who vide impugned Order - in Appeal upheld the refund order. Aggrieved, the Revenue has filed the present appeal.
4. Shri T.G. Rathod Ld. Joint Commissioner (AR) appearing for the Revenue submits that the impugned goods were imported under Project Import scheme and the Respondent were making supply of goods on
3|Page C/12645/2014-DB paper only whereas they were acting as EPC contractor for the buyer for importation contract dated 27.09.2010. As per provisions of Regulation 3(a) of the Project Imports Regulations, 1986 the goods which are single machine or a composite machine within the meaning assigned to it in Notes 3 & 4 to Section XVI of the First Schedule of the Customs Tariff Act, 1975 were excluded for the benefits of Project Import under heading No. 98.01 of the First Schedule of the Customs Act, 1975. Had the goods brought by the Respondent merely for supply in terms of EPC Contract, the same were not entitled for the benefits of project import looking to the aforesaid exclusion clause. The Respondent has imported the goods in their capacity as EPC Contractor and, therefore, they were supposed to supply the goods only after making further changes therein for erection and installation of the project till commissioning of the project so as to comply with their obligation under the contract. In that case, the identity of the goods at the time of importation does not remain same and it gets merged into the contracted single unit of ‗765KV & 400KV Substation'. The part sale of goods shown by the Respondent on paper only to avail refund of SAD for which they were otherwise not entitled. Thus the refund is not admissible. The Appellate authority has relied on purchase order of M/s Maharashtra Eastern Grid Power Transmission Co. Ltd. as per Para 2.1 of which - ―The total Contract price is inclusive of Freight & Insurance (F & TI) Charges for Onshore supply items/ materials and Taxes & Duties except octroi and entry tax which shall be paid extra at actual, if applicable. Thus it is clear that the burden of taxes including VAT has been passed on to the buyer. The price paid by the buyer includes ―VAT‖ in addition to other taxes has already been included in price paid by M/s Maharashtra Eastern Grid Power Transmission Co. Ltd. Therefore the same has been passed on to the buyer and the doctrine of unjust enrichment is applicable. The Respondent has availed double benefit. The copy of invoice of Respondent are not co-related with import document as the invoice of Respondent does not mention the reference of Bill of Entry No., BL No. , Invoice No. under which the goods were imported and paid 4% SAD and thus the condition of the notification no. 102/2007 is not fulfilled. The value shown in Bill of Entry and value shown in invoice does not match. The invoice does not bear remark whether the goods imported and on which 4% SAD has been paid, has been sold. The sanction of refund without obtaining proper explanation
4|Page C/12645/2014-DB from Respondent and without taking on record the co-relation of import goods is improper. The Notification No. 102/2007 dated. 14.09.2007 exempts the goods when imported into India for subsequent sale whereas in instant case the goods are imported for specific end use for a power project and sale if any is a subsequent/ unwarranted even created by the importer to avail ineligible SAD Refund. The goods were imported in capacity of EPC Contractor and the purported sale was only on paper. Once the goods have been installed and the project commissioned, the identity of the imported goods does not remained same and gets merged into the single contracted unit of the ―Power Project‖.
5. On the other hand, Shri Hardik Modh with Sh. V.S. Nankani Ld. Counsel appearing for the Respondent has supported the impugned order and relies upon the CA certificate as well as the balance sheet showing that the SAD component was not passed on to the buyer and are receivable. He also relies upon the following judgments in support of his contention:
Equinox Solution Ltd - 2011 (272) ELT 310 (TRI)
Reliance Communications Infrastructure Ltd - 2012 (279) ELT
85 (TRI)
Gujarat Boron Derivatives P. Ltd -2012 (280) ELT 94 (TRI)
Gujarat Boron Derivatives P. Ltd -2012 (280) ELT 107 (TRI)
MIRC Electronics Ltd - 2013 (287) ELT 386 (TRI)
Interplex India P. Ltd - 2013 (290) ELT 386 (TRI)
IMP Enterprises -2013 (292) ELT 451 (TRI)
Pure Trading Asia Ltd - 2012 (280) ELT 149 (TRI)
Shrinath Dyeing -2010 (282) ELT 622 (Tri)
STP Ltd - 2011 (267) ELT 110 (TRI)
He further submits that the Revenue has not cited even a single instance of sale invoices not tallying with BOE and submitted a comparative chart.
6. Heard both the sides and perused the records of the case. The exemption under Notification No. 102/2007-Cus from 4% SAD is available by way of refund mechanism wherein the importer has to pay
5|Page C/12645/2014-DB 4% SAD at the time of importation of the goods and after submitting the evidence of payment of VAT/ Sales tax, he is eligible for the refund of 4% SAD. We find that the impugned goods were imported under 10 Bill of Entries. The revenue has objected to the refund claim on the ground that the goods were imported for execution of EPC Contract and thus once used and undergone process has lost their identity and therefore did not remain as such. Also that the Respondent has recovered the duty charged by them on the sale of finished goods to the buyer and thus the refund is hit by clause of unjust enrichment. The revenue has relied upon the Project import Regulations that if the goods were imported as single or composite machines the Respondent would not have been eligible for project import benefits. We find that the notification in question provides for exemption/refund of SAD if the imported goods are subsequently sold and they have suffered VAT/ CST. We agree with the views of the Appellate Commissioner that the provision of one statute i.e. Project Regulations cannot be imported into the provisions of Notification No. 102/2007-Cus to interpret and deny the exemption/ refund of SAD. Once the assessee has paid CST/ VAT on sale of imported goods, there is no question of retaining the 4% SAD as the payment of such CST/ VAT is the only criteria for granting refund. The adjudicating and the Appellate authority have found from the records that the imported goods on which SAD was paid have been sold by the Respondent to their buyer on further payment of VAT/CST and in such case we do not find any reason to deny refund on the ground that the goods were part of Project contract and has lost their identity. The tribunal in case of Reliance Communication Infrastructure Ltd. 2012 (279) ELT 85 has held as under:
"5. We have carefully considered the submissions from both the sides and perused the records. In this case, there is no dispute that the Set Top Boxes have been imported by the respondent for supply to their consumers on right to use basis for which some amount is charged by the respondent and on that amount VAT has been paid in terms of provision of the VAT Acts of the State Governments. The department‟s contention is that supply of Set Top Box on right to use basis to the consumers when the ownership remains with the respondent cannot be treated as sale. Relevant portion of the exemption Notification No. 102/2007-Cus., dated 14-9-2007 is reproduced below :-
"G.S.R. (E) - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India for subsequent sale, from the whole of the additional duty of customs leviable thereon under sub-section
6|Page C/12645/2014-DB (5) of section 3 of the said Customs Tariff Act (hereinafter referred to as the said additional duty).
2. The exemption contained in this notification shall be given effect if the following conditions are fulfilled :
(a) the importer of the said goods shall pay all duties, including the said additional duty of customs leviable thereon, as applicable, at the time of importation of the goods;
(b) the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible;
(c) the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer;
(d) the importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may be;
(e) the importer shall, inter alia, provide copies of the following documents alongwith the refund claim:
(i) document evidencing payment of the said
additional duty;
(ii) invoices of sale of the imported goods in respect of
which refund of the said additional duty is claimed;
(iii) documents evidencing payment of appropriate sales tax or value added tax, as the case may be, by the importer, on sale of such imported goods".
6. Thus, from the perusal of the notification, it is clear that for refund of SAD the main conditions to be satisfied are -
(a) „The goods have been imported for sale;
(b) On sale of the goods, appropriate sales tax or VAT has been paid; and
(c) The sales invoices specifically indicate that no credit of the SAD paid under Section 3(5) of the Customs Tariff Act, 1975 shall be admissible‟.
7. The main purpose of the exemption is that the same goods should not suffer SAD as well as VAT/Sales Tax. Though the word „sale‟ has not been defined in this notification, it is clear that the word „sale‟ must be understood in the sense in which it has been defined in sales tax/VAT Acts of various State Governments or Central Tax Acts, 1956 and in these Acts the word „sale‟ also includes transfer of right to use any goods for any purpose (whether or not for a specified period) for cash or deferred payment or other valuable consideration. In this case, there is no dispute that the imported Set Top boxes have been supplied by the respondent to their consumers on right to use basis for which some amount has been charged on which VAT has been paid. Department‟s plea that the respondent‟s transactions with their customers cannot be treated as sale is, therefore, without any basis. It is also not the allegation of the department that the customers to whom the Set Top boxes have been supplied on right to use basis have availed cenvat credit of the SAD. As observed by the Commissioner (Appeals) in the impugned order, even the respondent have not availed the cenvat credit of the SAD in their
7|Page C/12645/2014-DB RG23-C Part-II register. As regards department‟s pleas that the Commissioner (Appeals) remanded the matter to the original authority for which he has no powers, we find that there is no order for remand and what the Commissioner (Appeals) has done is that he has allowed, the appeal subject to verification of the original documents for the purpose of refund wherever necessary in terms of the Notification No. 102/2007-Cus. and this direction cannot be treated as remanding the matter to the original adjudicating authority for de novo adjudication. In view of this, we do not find any infirmity in the impugned order. The appeal as well as stay applications of the Revenue are dismissed."
7. We find that the Appellate authority on scrutiny of documents has observed that despite the Respondent's responsibility for implementation of the whole power project including installation and commissioning, the right to use of the said goods was already transferred to the buyer by way of subsequent sale of such goods under commercial invoice for which they were receiving payments from the buyer on pro-rata basis as per the terms of purchase order. That thus apart from EPC Contractor, they also assumed the status of a supplier of all equipments to the project. It is also an admitted fact that they have completed the installation and commissioning of the entire project and supplied the complete project ( Electric Sub-Station) to the buyer under the said invoices. The respondent had submitted before the adjudicating authority the copies of CST returns, sales invoice and CST payment challans in support of their claim and total tax liability of CST of Rs. 7.32 crore was deposited by them under 2 separate challans dated 19.4.12 for Rs. 3 crore and challan dated 24.2.12 for Rs. 4.32 crore. It is absolutely clear that the imported goods has been transferred to the buyer by way of subsequent sale of such goods under the cover of sales invoices, for which they have received payment from the buyer on pro-rata basis, as per the terms of purchase order. It shows that the Respondent also acted as supplier of all impugned equipment / goods by virtue of Section 2 (9) of the CST Act which states - that a sale of goods is transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration and includes a transfer of goods on the hire purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge of pledge on goods. From the above definition, it clearly transpires that there has been transfer of imported goods from the Respondent to the buyer. Even though the purchase order, i.e. EPC Contract is having composite contract value but the sales invoices issued by the Respondent included the sale value at which the
8|Page C/12645/2014-DB imported goods were sold to the buyers. The Ld. Counsel appearing for the Respondent has relied upon the judgment of Hon'ble Apex Court in case of Rajasthan Chemists Association - 2006 (202) ELT 217 (SC), wherein the hon'ble Supreme Court while examining the scope of Entry 54 of List II of Seventh Schedule of the Constitution of India held that sale as per Goods Act, 1930 is alone subject to sales tax under said Entry. He has also relied upon another judgment of the Hon'ble Apex court in case of BSNL - 2006 (2) STR 161 (SC) wherein the Hon'ble Supreme Court held that it is possible for the state to tax the sale element provided there is a discernible sale and only to the extent relatable to such sale. We find that the aforesaid two judgment are applicable to the present case since it is undisputed that the Respondent has discharged the CST payments on such goods, even though they were part of EPC contract, as the CST / VAT stands paid on contract value. The value of goods, which were supplied as part of the EPC project is discernible from the sales invoices and the question of discarding sales of such goods and consequent liability of sales tax cannot be questioned as there is no dispute regarding substance of sales of the goods and the Respondents are eligible for exemption from SAD.
8. The Revenue has argued that the price indicated in the purchase order is inclusive of all taxes & duties and the respondent has passed on the incidence of VAT to the buyer and there has been unjust enrichment. We find that unjust enrichment in the instant case would apply only if the Respondents would have passed the incidence of 4% SAD paid by them and not the element of VAT levied and recovered by the importer from their buyer as part of their subsequent sale of such goods. Para 2 (vii) of Circular 16/2008 issued by the Board clear states that the intention of the Government is not to allow the importer to recover 4% SAD from the buyer and to claim the refund from Customs as well and that the only method to ensure this is to make it conditional to satisfy the principal of unjust enrichment. It is not the case of the appellant department that the respondent had not furnished documentary evidences regarding not passing on the incidence of 4% SAD to their buyer. The lower authorities have confirmed that the Respondent had submitted such documentary evidences in compliance. In such case we are of the view that the refund to the Respondent is not hit by unjust enrichment clause. The recovery of VAT by the Respondent
9|Page C/12645/2014-DB on subsequent sale does not casts any effect on exemption from SAD as the unjust enrichment would apply only if the Claimant recovers the SAD amount from buyers. The Appellate Authority has also examined the issue as to whether the Respondent has passed on the SAD Component to their buyer whether it pertains to passing on SAD component to the buyers. He has observed that none of the sales invoices were issued by the Respondent under rule 11 of the Central Excise Rules to enable the buyer to avail cenvat credit nor the invoices indicate the SAD component separately as available credit. That each invoice carry a declaration regarding non-eligibility of Cenvat Credit and thus compliance to the conditions specified under para 2 (b) of the subject notification was made. He also found that there was no prospect of subsuming the SAD component into the value charged by the Respondent in their sales invoices as such sales value (including CST amount) is much lower as compared to the total purchase value of goods (excluding SAD component) and the refund claim is supported with collateral evidences in the form of a certificate issued by their statutory auditors which certified that the respondent has not passed on the SAD component to their buyers which is not in doubt.
9. In view of such observation of the Appellate Commissioner, which has been made on basis of facts and records, we do not find any reason to interfere with the impugned Order-in-Appeal. We thus reject the appeal filed by the revenue and uphold the Order-in-Appeal.
(Pronounced in the open court on 25.04.2019) (Ramesh Nair) Member (Judicial) (Raju) Member (Technical) Seema