Customs, Excise and Gold Tribunal - Bangalore
Gmr Energy Ltd. And Shri Siddhartha Deb, ... vs The Commissioner Of Customs on 3 August, 2007
Equivalent citations: 2007(122)ECC355, 2007(148)ECR355(TRI.-BANGALORE), 2007(218)ELT676(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. These appeals have been filed against the Order-in-Original No. 23/2005 dated 02.05.2006 passed by the Commissioner of Customs, Bangalore.
2. The appellants M/s.GMR Energy Ltd., Bangalore, formerly known as M/s. Tanir Bavi Power Company Pvt. Ltd. (hereinafter referred to as M/s. GEL for short), imported Hot Gas Path Parts from M/s. GE, USA. The goods were cleared on payment of duty. Later, the Directorate of Revenue Intelligence (DRI) carried out detailed investigations leading to the issue of Show Cause Notice alleging that the appellants (1) had undervalued the goods, and (2) had wrongly availed the benefit of Notification No. 21/2002-Cus dated 01.03.2002 in respect of the goods imported under two Bills of Entry dated 25.06.2003 and 12.04.2004 respectively. The Adjudicating Authority re-determined the assessable value of the goods imported under Rule 8 of the Customs Valuation Rules. He denied the benefit of exemption Notification 21/2002-Cus for the goods imported under two Bills of Entry. He confirmed differential duty amount of Rs. 4,20,31,824/- on account of under valuation and an amount of Rs. 3,16,56,697/- on account of denial of the Notification benefit. The longer period has been invoked. Interest under Section 28AB was demanded. Mandatory penalty equal to the duty demanded was imposed under Section 114A of the Customs Act. The impugned goods were held liable for confiscation under Section 111(m) and under 111(o) of the Customs Act, 1962. A penalty of Rs. 10,00,000/-was imposed on Shri Siddharth Deb, Associate General Manager of M/s. GEL under Section 112B of the Customs Act, 1962. The appellants strongly challenge the impugned order. Hence, they have come before the Tribunal for relief.
3. S/Shri V. Sridharan and G. Shiva Dass, the learned Advocates, appeared for the appellants. Shri P.R.V. Ramanan, the Special Counsel for the Revenue assisted by Shri K. Sambi Reddy, JDR, appeared for the Revenue.
4. In order to appreciate the issues involved in these appeals, we record the following facts:
4.1. The appellants M/s. GEL had imported a Barge Mounted Power Plant with 5 Gas Turbines. Four Gas Turbines were mounted on the Barge and one was kept as stand by. The import was made in January 2001 under Project Import Regulations, 1986 availing concessional rate of duty. The appellants' Registered Office is in Bangalore and their Power Plant is situated at Tanir Bavi Village, Mangalore. They generate 220MW Power using the four Gas Turbines and a Steam Turbine and the electricity generated is supplied under Power Purchase Agreement to the Karnataka Power Transport Corporation Ltd. (KPTCL) for a term of 7 years. The Gas Turbines installed on the Barge were manufactured by M/s. GE, USA. The appellants entered into a contract with M/s. GE, USA for providing field service, labour, parts and repairs, etc. As far as these appeals are concerned, we are interested in what is known as "Long Term Assured Parts Supply Agreement: (LTPSA or LTAPSA) entered with M/s. GE Energy Parts Inc., Atlanta, Georgia, USA, for the supply of parts for which M/s. GEL have to pay monthly fired hour charges, one time planned maintenance parts supply charges and unplanned maintenance parts supply charges as detailed in Article 5 of the Agreement. As per the above Agreement, M/s. GE, USA is required to supply Hot Gas Path Parts at an interval of 12,500 fired hours totaling to 3 such Hot Gas Path Parts for each Gas Turbine in the entire Agreement period. Hot Gas Path or Hot Path of the Gas Turbine consists of Rotor, Stage-1 Nozzle, Stage-2 Nozzle and Combustor. Till April 2004, totally 5 consignments of Hot Gas Path were imported under LTPSA by the appellant through Air Cargo Complex, Bangalore. The following Bills of Entry were filed.
(i) B/E No. 05698 dated 18.04.2003
(ii) B/E No. 06338 dated 30.04.2003
(iii) B/E No. 9140 dated 25.06.2003
(iv) B/E No. 591624 dated 27.03.2004
(v) B/E No. 598675 dated 12.04.2004.
In respect of Goods covered by Bills of Entry in Sl. Nos. 3 and 4 above, the goods were described as "Goods for renovation of Power Generation Plant" and "Goods for renovation of the Gas Turbine 191-266" for availment of the benefit of Notification No. 21/2002-Cus (Sl. No. 236). The goods were covered by Commercial Invoices and duties were paid based on the values shown in the Commercial Invoices. The detailed investigations revealed that in terms of the LTPSA, the appellants are required to export each part, which is supplied by the foreign supplier within thirty days of the replacement. In other words, the condition of supply of any part is that the appellant had to export the used part. The part, which is imported, can either be new or refurbished. However, as per the LTPSA, after 12500 fired hours, each part will be replaced. The payment is based on the agreed sum for fired hours and sum fixed chargers. Further, it is seen that the seller has goods title to the components removed. While exporting the old part, the appellant declared its value based on the advice of the foreign supplier. This value comes to one third of the price of the new part. From the above, it is clear that in the present case, there is no Transaction Value. The amount shown in the Commercial invoice is different from what one is required to pay for outright purchase. In fact the amount shown in the commercial invoice corresponds to what is known as exchange price under Rotable Exchange Programme. Under the Rotable Exchange Programme, the cost of the returned part is taken into account and the customer will have the advantage of cost saving as well as easy disposal of old items. The case of the Department is that the value of the returned part is to be included along with the monetary consideration paid by the appellants to the foreign supplier for the reason that there is no realisation of export proceeds by the appellants for the old part. The value declared for the old part at the time of export is one third of the price under the Rotable Exchange Programme. Therefore, this amount has to be added to the invoice value and duty needs to be re-assessed. As far as valuation is concerned, this is the case of the Department.
4.2. As regards the benefit of the Customs Notification No. 21/2002-Cus dated 01.03.2002, the case of the Department is that the Notification benefit is meant for modernization and renovation. At the time of import of the goods, the appellants did not have the required Certificates stipulated in the Notification. The investigations revealed that the appellants applied to the concerned authorities long after the import of the goods and further it is alleged that they mis-represented the facts. Therefore, the Show Cause Notice proposed to deny the benefit and the Adjudicating Authority confirmed the proposal.
5. The learned Advocates urged the following points:
(i) The values declared by the appellants in their invoices were as per the prices published in the price lists of GE under Rotable Exchange Programme. The appellants have paid duty on the above values. The prices declared by them fully satisfy all the criteria laid down in Section 14 of the Customs Act, 1962. The Hot Gas Path Parts have been ordinarily offered for sale by GE in the course of International Trade at published prices which are the same for any other customer of GE anywhere else in the world under the Rotable Exchange Programme. It is also not the case of the Department that GE and appellants are related to each other. The appellants do not pay any amounts to GE at the time of import of the goods. The only amounts paid by the appellants are as per the Agreement. It is clear from Annexure-I to the Show Cause Notice that at the end of the term of LTSA after 7 years, the appellants would be paying GE a total sum of USD 209,88,100 for a total of 12 Hot Path Gas Parts replaced during the said period. The average price per Hot Gas Path Parts works out to USD 17,49,000. This amount is almost equal to USD 17,40,000 declared by the appellants at the time of import of the Hot Path Gas Parts. Hence, by operating under LTSA, no extra consideration accrues to GE even after the period of the Agreement.
(ii) The valuation of the imported goods is to be done under Section 14 on the basis of the price at which such or like goods are ordinarily sold, or offered for sale, and not on the basis of the 'cost' of the imported goods. The Department has committed a fundamental error while trying to equate the price paid or payable to the cost of the imported goods. After making this fundamental error, the Department is trying to arrive at the cost of the imported parts by adding the price of the removed Hot Path Gas Parts.
(iii) The assumption that the price of the defective/returned Hot Gas Path Parts was not considered by GE at the time of fixation of the price under the Rotable Exchange Programme is erroneous and clearly without any basis. It is a common international practice that the replaced part is returned to the supplier under Exchange Programmes in operation to machinery used in industrial application. The Indian Customs has recognized the above concept of Exchange Programme by issue of Notification No. 72/94-Cus dated 01.03.1994 in terms of which when the replaced part is sent to the supplier, duty is levied only on the value made up of the Standard Exchange Cost, Insurance and freight charges both ways. The Explanation appended to the above Notification refers to a Standard Exchange Programme and defines it as 'a scheme under which the exporter of aircraft parts undertakes repair or overhaul of aircraft parts and agrees to supply a similar repaired or overhauled part in exchange for a part sent for repair or overhaul.
(iv) The concept of incremental value would not apply when the refurbished item is first imported and the defective item is exported at a later stage as it has happened in this case. Therefore, the reliance placed by the Department on Article 2.8 of the long Term Parts Supply to allege that only the incremental value has been declared by the appellant is patently incorrect.
(v) Rule 9(1)(d) will not be applicable as the imported goods are not subjected to subsequent resale, disposal or use by the appellants and, therefore, the question of the value of any part of the proceeds accruing directly or indirectly to the seller does not arise.
(vi) The removed Hot Gas Path Parts which are re-exported have no commercial value. The notional value given is solely for the US Customs purpose.
(vii) Rule 9(1)(e) is also not applicable to this case because the term 'payment' used in Rule 9(1)(e) means an actual payment of money by the importer to the seller effected either by transfer or by way of letters of credit or negotiable instruments.
(viii) The appellants rely on the decision of the Supreme Court rendered in the case of Tata Iron and Steel Co. Ltd. v. CCE, Bhubaneswar in which the apex court has explained the true import of Rule 9(1)(e). The tests laid down by the Apex Court in that case are (a) there must be a payment made as a condition of sale; and (b) such a payment should not have been included in the price paid or payable. The return of the defective/removed part cannot be deemed to represent 'payment' and, therefore, Rule 9(1)(e) of the Customs Valuation Rules cannot be invoked in this case.
(ix) A harmonious reading of Rule 9 shows that 9(1)(d) and 9(1)(e) refer only to remittances of actual payments.
(x) The Show Cause Notice did not contain any provision to re-determine the assessable value of the imported goods under Rule 8 of the Customs Valuation Rules. Consequently, the appellants were never put on notice about the intention of the Department to resort to the provisions of Rule 8 of the Customs valuation Rules 1988. Therefore, the confirmation of demand under Rule 8 is beyond the proposal contained in the Show Cause Notice. The following case-laws are relied on:
a. Hindustan Polymers Co. Ltd. v. CCE 1999 (106) ELT 12(SC) b. Warner Hindustan Ltd. v. CCE c.Chimique Industries v. CCE 2005 (100) ECC 373
(xi) The assumption that the cost of the removed parts is adjusted against the imports is incorrect and without basis. The above assumption is based on the letter dated 11.07.2003 written by the appellants to the Manager, Bank of India. A reading of the letter does not in any way suggest that the cost of the removed part is adjusted against the imported part.
(xii) The value declared for insurance is the best reference to determine the intrinsic value of the goods imported. GE has duly declared the value indicated in their invoice raised on the appellants for insurance purposes. The following case-laws are relied on:
a. Mirah Dekor v. CC 1998 (35) ELT 357 b. Delhi Plastics v. CC c. Bureau Veritas v. CC Affirmed by Supreme court as reported in 2005 (98) ECC 834(SC) d. Thirumalal Chemicals Ltd. v. CC
(xiii) Since no payments are made to GE for the parts imported, no Transaction Value can be arrived at in terms of Rule 4 read with Rule 9. The Transaction Value cannot be arrived at in terms of Rules 5, 6, 7 and 7A. Therefore, the residuary method of valuation as per Rule 8 has to be adopted. That results in the adoption of the price available in the published price lists of GE, as there is no Transaction Value as contemplated by the Department is possible.
(xiv) The Department has relied on the statement of Shri Naresh Manchanda to hold that the prices under the Rotable Exchange Programme are fixed after taking into consideration the fact that the defective parts are received by GE. The appellants requested the Commissioner to produce Shri Naresh Manchanda for cross examination. The Commissioner has refused to produce him for cross examination on the ground that he was no longer posted in India. If a witness whose statement has been relied upon is not produced for cross-examination, then the Department cannot rely on such a statement for the reason that only the deponent of the said statement is capable of explaining the purport of the statement. The Commissioner could have transmitted the questionnaire prepared by the appellant to either Shri Naresh Manchanda or to GE for clarification which would have brought out the purport of the statement made by Shri Naresh Manchanda. This has not been done. No reasons have been adduced by the Commissioner for not acceding to the request of the appellants. This has resulted in gross violation of the Principles of Natural Justice.
(xv) Notification 94/96-Cus dated 16.12.1996 exempts goods re-imported into India after being subject to repairs from so much of the duty leviable as is in excess of the repair charges and the cost of the parts/components payable by the importer. The appellants submit that effectively this is what is implied by the clause in the LTSA Agreement to the effect that GE would furnish to the appellants reasonable information about the incremental cost of the refurbished part which is in keeping with internationally accepted practice to levy duty in respect of repaired/refurbished items only on the value of repairs and the value of parts/components replaced.
(xvi) The appellants have not mis-declared the assessable value of the parts at the time of import. They have correctly declared the value in the Bill of Entry based on price indicated by GE in the invoice raised for Customs purposes. As the defective/returned part had only scrap value, the return of such a part did not constitute additional consideration under Rule 9(1)(d) and 9(1)(e) of the Customs Valuation Rules. In the invoice, the value of the goods declared was as per the prices indicated in the price list of GE for the Rotable Exchange price. At the foot of the invoice, GE has also duly declared that the supplies were as per the LTSA between the appellants and GE. The value of one third import price attributed to the returned goods is the value attributed by GE and as far as the appellants are concerned, these goods have no commercial value. The appellants are a Public Limited Company established for the purpose of generation of power, which in turn, is supplied to the Karnataka Power Transmission Company Ltd. The Board of Directors has representatives from the financial institutions who monitor the financial transactions of the company. Hence, it cannot be said that the appellants had any intention to mis-declare the value of the goods with an intention to evade payment of duty.
(xvii) The representative of the Kerala BSES Power Ltd. supports the appellants' case. It is revealed that the Department had accepted the value declared by them based on the commercial invoice raised by GE in respect of imports made under the Rotable Exchange Programme and no additions were made to the declared values. The Assistant Commissioner, in his Order-in-Original No. 20/02 dated 17.04.2002, dropped the proposal to add the value of the returned part to the value of the refurbished part imported under the Rotable Exchange Programme. While the Department had chosen to file an appeal before the Commissioner of Customs (Appeals) on other issues, they had accepted that portion of the order of the Assistant Commissioner, dropping the proposal to add the value of the returned part to the refurbished part imported under the Rotable Exchange Programme. In the above circumstances, the Commissioner should have followed the decision of the Department and should not have added the value of the returned part. The provisions of Customs Law have to be uniformly applied without any discrimination.
(xviii) Each of the invoices filed by the appellants with the Bills of Entry in question clearly carried a declaration by GE as follows:
These parts are supplied under the Long Term Parts Supply Agreement dated December 20, 2000 between Tanir Bavi Power Company Private Limited and GE Energy Parts Inc. (xix) When the invoice clearly disclosed that the supply was in pursuance to an agreement, nothing prevented the Department from raising the issues now raised in the Show Cause Notice at the time of import itself.
(xx) The Department seeks to rely on Article 2.8 of the LTPSA to allege under valuation. This very information was disclosed to the Department at the time of import itself. When they declared the same to the Department, they cannot be said to have suppressed/mis-declared the facts to the Department. The following case-laws are relied on:
a. Cosmic Dye Chemical v. CCE, Bombay b. Tamil Nadu Housing Board v. Collector Though the Commissioner, in para 122 of the impugned order, has invoked the proviso to Section 28(1) of the Customs Act, 1962 to confirm the demand of duty, no findings have been adduced to justify invoking the longer period of limitation.
(xxi) As regards the denial of exemption Notification 21/2002-Cus in respect of the two Bills of Entry, it was submitted that the Show Cause Notice alleged that the appellants had not produced the prescribed Certificate at the time of import of the goods. The appellants were not in a position to produce the prescribed certificate and, therefore, they executed a Bond for the differential duty as directed by the Department. The appellants were, thereafter, permitted to clear the goods by paying duty at the concessional rate of duty pending production of the prescribed certificate. Subsequent to the import, the appellants furnished the necessary certificate. Inviting our attention to the said Notification to Clause (b) of condition 45, it was urged that the Notification does not contain a condition to the effect that requisite certificate and recommendation should be produced at the time of import of the goods itself to claim the exemption. When a condition of production of certificate at the time of importation is not prescribed, it should be construed that such a condition was consciously omitted by the Government. This is evident from the other serial numbers cited by the appellants which specifically contain such a condition. In any case, the appellants have produced the necessary certificate from the General Manager (Tech.) of the KPTCL and recommendation from the Principal Secretary to the Government of Karnataka, Energy Department. Therefore, the proposal to deny exemption under Notification No. 21/2002-Cus is not sustainable. The Commissioner, during the personal hearing, pointed out that the Certificate was issued by a General Manager and not by the competent authority viz. Officer of the rank of Chief Engineer. The appellant therefore, obtained clarification to the effect that the General Manager of KPTCL is above the rank of the Chief Engineer in the KPTCL. When the appellants imported a consignment of the same goods through Air Cargo Complex, Bangalore on 27.03.2004, they produced similar Certificates and the goods were allowed by the Customs Authorities after extending the benefit of concessional excise duty under Notification No. 21/2002. The Department, having accepted the Certificate in a particular manner for one consignment, cannot now turn around to say that it will not accept such certificate for other consignment and seek to demand by invoking the extended period.
(xxii) The Commissioner denied the exemption on the ground that the goods imported would not be covered by the expression "scheme for renovation or modernization of such power plant" occurring in the Notification and consequently, the goods imported under Bills of Entry dated 25.06.2003 and 12.04.2004 would not be entitled to the concessional rate of duty. The above ground in the impugned order was never the case set up by the Department in the Show Cause Notice issued. A demand confirmed on a ground beyond the proposals in the Show Cause Notice is not sustainable. The following case-laws are relied on:
a. Hindustan Polymers Co. Ltd. v. CCE 1999 (106) ELT 12(SC) b. Warner Hindustan Ltd. v. CCE c. Chimique Industries v. CCE 2005 (100) ECC 373 (xxiii) Once the authority competent to grant the Certificate is satisfied that the goods are required for renovation/modernization, the Customs authorities cannot sit in judgment over the validity of the certificate.
(xxiv) The Commissioner has sought to deny the exemption on the ground that the Certificates did not meet the requirements of the Notification, as some of them used the term 'upkeep' instead of the term 'renovation/modernization'. The Commissioner has conveniently ignored the certificates as per the terms of the Notification. In any case, the interpretation given by the Commissioner that the term 'upkeep' was not the same as 'renovation/modernization' is a narrow interpretation and is not keeping with the intention of the Government and the authority competent to grant such certificate.
(xxv) The 5 Bills of Entry in respect of which the demand has been confirmed have been assessed during the period April 2003 to April 2004 and the Show Cause Notice has been issued on 12.08.2004. The assessments have been completed and the clearances allowed. In the case of CCE v. Cotspun Ltd. , the Apex Court held that if a clearance has taken place in pursuance of an order of assessment, which is the case of Central Excise, that is after approval of Price List or Classification List, it cannot be said that there is short levy in respect of that clearances or assessment. The above judgment has been overcome by Section 110 of the Finance Act, 2000 which retrospectively validated the action taken under Section 11A of the Central Excise Act, 1944 notwithstanding any approval or assessment done by the Department. There is no such retrospective validation done to Section 28 of the Customs Act, 1962. It has been held in many decisions that where final assessments have not been reviewed under Section 129D, notice of demand under Section 28 is not valid. The following case-laws are relied on:
a. CC, Mumbai v. K.C. Shah and Ors. 2004 (64) RLT 314(T) b. CC v. Lord Shiva Overseas 2005 (98) ECC 50 c. Italia Ceramics Ltd. and Ors. v. CC 2005 (99) ECC 201 d. Wipro Ltd. v. CCE (xxvi) Revenue is always taking the view that refund under Section 27 of the Customs Act cannot be claimed unless the assessment done in a Bill of Entry is challenged by the importer.
(xxvii) The assumption of the Commissioner that the prices declared by GE in their invoices represent only the incremental value, is factually incorrect inasmuch as GE has published a list price for the customers operating under the Rotable Exchange Programme.
(xxviii) In view of the above submissions, the goods imported by the appellants are not liable for confiscation under Section 111(m) and 111(o) of the Customs Act, 1962. As the demand is not sustainable, they are not liable to penalty under Section 114A of the Customs Act nor liable to pay interest as demanded.
6. The learned Special Counsel Shri P.R.V. Ramanan, at the outset, explained the facts of the case. The gist of his explanation as given in his written submission is as follows:
6.1. Investigations conducted by the DRI revealed as follows:
(i) the return of the old/used Hot Path parts, removed from the GEL plant to GE is compulsory under the condition of supply of the imported goods;
(ii) such returned Hot Path Parts are exported to GE, USA;
(iii) no sale proceeds are received by GEL on the export of removed Hot Path Parts to GE, USA;
(iv) such returned Hot Path Parts, on removal from the main equipment, become the property of GE, USA;
(v) such returned Hot Path Parts are repaired/refurbished by GE, USA and sold to any of its customers and the resultant proceeds accrue to GE, USA;
(vi) the price of the imported Hot Path Parts under the Rotable Exchange Program is adjusted by taking into account the cost of the returned part;
(vii) the price of the returned Hot Path Parts is taken as 1/3rd of the price of the refurbished parts by the US Customs;
(viii) the price of the imported goods i.e. refurbished Hot Path Parts is a reduced price on account of the above;
(ix) GEL did not declare or disclose these facts to Customs at the time of importation and misdeclared the assessable value of the imported goods;
(x) The fact that the goods imported were under Rotable Exchange Program was not brought to the notice of the Customs;
(xi) The same was also not declared at the time of exporting the removed Hot Path Parts;
(xii) In the case of two imports in which the benefit of exemption under Notification No. 21/2002-Cus dated 01.03.2002 was availed, requisite approval for renovation/modernization and necessary certificate from the competent authority was not available at the time of importation;
(xiii) Request for such an approval and issue of certificate was made to the competent authorities only after the investigation was initiated by the DRI; and
(xiv) The certificate provided by the competent authority states that the imports were essential for the upkeep of the generating units of the power plant.
7. The learned Special Counsel countered the contentions of the appellant in the following manner:
1. The appellants' contention that the value declared at the time of importation is the correct value of the imported goods is not acceptable in the light of the following facts.
GE publishes separate 'Price Lists', one for outright sale and another for Rotable Exchange Programme. The price of Hot Path Parts under Outright sale is indicated as only "Quote". From contemporaneous imports, it is seen that the Outright sale price of identical/similar refurbished parts was much higher than the value under Rotable Exchange Program. For example, during 2004, the price of the Hot Path Parts was USD 2.07 million on outright sale in contrast to USD 1.71 million under Rotable Exchange Program.
The transaction involving supply of Hot Path Parts under the LTAPSA is not a sale transaction and the price indicated in the invoices were not the transaction values.
As no payment was made with reference to the declared value on the proforma invoice, the same value cannot be taken to represent the Transaction Value.
GE's employee himself clarified that the price under Rotable Exchange Program is the adjusted price on account of the return of used/old Hot Path Parts. Therefore, the declared value does not represent the actual value of the goods and hence, is not the true customs value in terms of Section 14 of the Customs Act, 1962 read with the Customs Valuation Rules, 1988. Moreover, the supply of the aforesaid parts was subject to the condition that the used/old parts were to be returned to GE.
As per para 2.8 of the LTAPSA, GE was enjoined to indicate the incremental value over and above the value of the returned parts and the price indicated on the said proforma invoice is nothing but the incremental value and not the real value of the imported parts. Our attention was invited to a ruling by Inland Revenue Service, USA, consequent to a Court decision that the transaction involving rotable exchange of spares under a service agreement were not in the nature of sale and such spares should be regarded as depreciable assets and not as inventory meant for sale.
2. The appellant contended that Rules 9(1)(d) and 9(1)(e) are not applicable, as the goods have only scrap value and the proceeds on account of return of the used/old goods do not accrue to GE and that the payments are not made in any of the forms specified in the Rule. Further, it was urged that once the goods are defective and removed, they have no commercial value for the appellants.
While exporting the old parts, the appellants had declared certain value in the relevant shipping bills and invoices. The proceeds of the removed Hot Path Parts exported are not realized by GEL, but adjustment to that extent is made in the price of the refurbished Hot Path Parts imported. This is substantiated by the price difference demonstrated earlier.
If the exported goods were only scrap and had no value, there was no purpose in exporting it to USA paying airfreight and insurance charges.
The returned parts are refurbished by GE and sold to their customers at a higher price or supplied under exchange program and accordingly, the proceeds accrue to the seller either directly or indirectly.
The extracts from the GE's website corroborates the operation of Rotable Exchange program to extend cost effectiveness to its customers under buy back policy of defective parts. Apparently, a notional price is arrived at for the returned part and accordingly adjustment to that extent is made in the price of the refurbished Hot Path Parts supplied.
The addition of an amount reflecting the proceeds accruing to the seller partakes the character of an addition under; the Rules 9(1)(d) and 9(1)(e) of CVR, 1988 inasmuch as the amount is the value declared to the US Customs and it is quantifiable and can be included in the Customs value under Rule 8. The respondent has invoked only Rule 8 and in doing so, he has adopted a customs value which is in consonance with the aforesaid Rules 9(1)(d) and 9(1)(e).
3. It was contended that there is no basis for assuming that the letters addressed to the bankers suggest that the cost of removed parts is adjusted against the imports.
The letter to the bankers indicates the reason for no inward remittance in respect of the export of the old part. It has been stated that the consideration for export and import of replacement parts is as per LTAPSA. The LTAPSA in turn states in Article 2.8 that "with respect to refurbished parts, seller shall furnish buyer with information regarding the incremental value of each refurbished part over the value of the comparable used part that was exported." From the above, it is very clear that the value declared in the invoice issued by GE for the parts imported represents the difference between the actual value of the said parts and the value of the old/used parts exported back to them.
4. The contention of the appellant that the insurance amount is reflective of the intrinsic value declared by GE, which is inclusive of freight and insurance is not acceptable for the reason that the price indicated in the proforma invoice is only a notional exchange price. It is not correct to say that the removed goods exported to GE has only scrap value as an insurance cover has been taken to cover the risk. From the above, it is clear that such parts have substantial value. As per US Customs and as accepted by GE, the value of the returned parts is 1/3rd of the exchange price. As the insurance amount is split between imported part and used part exported to GE as both have a value of their own, taking the insurance amount applicable only to imported parts and arriving at the conclusion as above, is not correct.
5. The appellants contend that the Department has presumed that the price under Rotable Exchange Program is the price after deducting the price of the returned part.
The following evidence adduced is relevant:
(i) Article 2.8 of the LTAPSA states that with respect to refurbished parts, the seller shall furnish to the buyer information regarding the incremental value of each refurbished part over the value of the comparable used part that was exported in order to limit the assessment of customs duties to the incremental value of each such refurbished part;
(ii) Under the Rotable Exchange Program, the price is mentioned as 'Exchange Price'.
(iii) Payment made to GE is not according to the prices mentioned in the proforma invoices accompanying the imports but as per the invoices raised by GE for periodic payments in terms of Article 5 of the LTAPSA (In fact it is worth noting that such payments by GEL to GE started much prior to the actual imports of the subject Hot Section Parts);
(iv) Re-export of removed parts to GE;
(v) Non-receipt of any sale proceeds towards the re-export of removed parts;
(vi) Corroborative statements of and communications received from GE personnel;
(vii) The price of the removed hot section is considered as 1/3rd of rotable hot section price as per the letter dated 2.7.2004 of Mr. Kalyan Das of GE;
(viii) Substantial difference in the price of identical/similar goods under two different schemes i.e. outright purchase and under Rotable Exchange Program;
(ix) Declaration of a value for the returned parts at the time of re-exporting the same;
(x) Certification to the Bankers during the export of the removed Hot Path Parts that there is no direct inward remittance in respect of the export as the consideration for the export and import of the replacement Hot path Section are as per the terms of LTAPSA;
(xi) Surcharge of 10% for delay in returning the removed parts also implies that the removed parts carry a value and re-export in good time is critical to GE.
6. The appellant's contention that the intention of the Government is to charge duty only on the repair charges in view of Notification 94/96-Cus dated 16.12.1996 is not acceptable as the said Notification exempts goods imported after being subject to repair abroad. But, the present case is entirely different in the sense that what is imported is different from the item which is exported. The Commissioner relied on the Bill of Entry dated 30.03.2004 relating to imports made by BSES, Kerala only to corroborate the case of the Department that the correct and actual value of Hot Path Parts in the ordinary course of international trade is much higher than that was declared by the appellants.
7. The appellants contended that the Commissioner has gone beyond the scope of the Show Cause Notice because the Show Cause Notice denies exemption only for non-production of the required Certificate at the time of import. But, the Commissioner, in the impugned order, has denied the exemption in spite of the fact that the said Certificate was produced later. The above contention is not acceptable because in para 29(xiii) of the Show Cause Notice, there is a specific allegation of willful misstatement as regards the requisite exemption certificate from the competent authority and the said exemption is not extendable to the goods in question. It is in examination of the said allegation the Commissioner has come to the conclusion that the subject goods are not eligible to the aforesaid exemption. Hence, he has not traversed beyond the Show Cause Notice. In terms of the Notification, the requisite certificate was required to be produced at the time of importation. But, the appellant had produced it seven months after import. Moreover, in their application to the competent authority, they had stated that they were proposing to import on a future date for renovation of the power plant, though that was not the case. It is also seen that the first competent authority has only certified that the spares in question were essential for the proper upkeep of the generating units. In terms of the Notification, the purpose should be only for modernization/renovation.
8. The appellants have contended that the confirmation of demand under Rule 8 is not within the purview of Show Cause Notice, as the said Rule has not been invoked. Even though it is true that there is no mention of this Rule, the Show Cause Notice proposes re-determination of assessable value on the basis of the invoice value plus the value of the returned parts. The appellants were put to notice for such a re-determination and demand of differential duty. Thus, in substance, applying the provisions of Rule 8 will not be going beyond the propositions in the Show Cause Notice when no prejudice is caused. Invoking the said rule in the order without mentioning it in the Show Cause Notice does not render the decision void. The following case-laws were relied on.
a) Supercom India Ltd. v. DGFT 2003 (160) ELT 69(Del.)
b) Pharmachem Traders v. Commissioner 1998 (104) ELT 542(T)
c) Hindustan Petroleum Ltd. v. CCE
d) N.B. Sanjana v. Elphinstone Spg and Wvg. Co. Ltd. 1978 (2) ELT (J339)(SC)
10. The invocation of longer period is being contested strongly by the appellants. The longer period is invocable for the following reasons:
(i) The appellants suppressed the fact that there was an LTAPSA.
(ii) That the invoice price was only a proforma invoice and not meant to be acted upon.
(iii) That the imports were under a Rotable Exchange Program.
(iv) That the used parts were mandatorily to be returned to GE.
(v) They had also claimed assessment on the basis of Transaction Value even though they were aware that there was no Transaction Value in the present case.
(vi) Under the LTAPSA, the invoices were to show only the incremental value over the value of returned parts to limit the Customs Duty liability.
(vii) Moreover, they mis-stated that their imports were for renovation of their power plant whereas the imports were actually meant for maintenance of the generating units as stated by the GM(Tech), KPTCL.
(viii) In view of the above lapses, there is ample justification for invocation of the longer period under proviso to Section 28(1) of the Customs Act.
8. During the hearing of the appeal on 08.06.2007, certain questions were put to the respondent. Shri P.R.V. Ramanan, the learned Special Counsel, submitted additional submissions clarifying the questions put to him. On the additional submissions, the appellants had also responded by their written submission dated 15.06.2007.
9. We have gone through the records of the case carefully. The facts of the case have been elaborately dealt with in the submissions made by the appellants and also by the Revenue. Therefore, we do not find it necessary to repeat the same. The main issues involved are as follows:
(i) Whether the values declared by the appellants for the Hot Gas Path Parts imported represent the correct value for Customs assessment purposes and whether the Re-determination of such values by the Commissioner and consequent demand of differential duty are in accordance with law.
(ii) Whether the denial of benefit of exemption Notification 21/2002-Cus dated 01.03.2002 in respect of the goods imported under the two Bills of Entry are in order.
Based on the findings in respect of the above issues, the other issues, which arise, can be decided.
9.1. First, let us deal with the valuation issue. The impugned goods have been imported under cover of 5 Bills of Entry. The Bills of Entry were accompanied with Commercial Invoice and also the necessary statutory declarations. The appellants had discharged the duty liability on the basis of the value declared in the Commercial Invoices. The goods had also been cleared. At the bottom of the invoices it is stated that "These parts are supplied under the Long Term Assured Parts Supply Agreement dated December 20, 2000 between Tanil Bavi Power Company Pvt. Ltd. and GE Energy Parts, Inc." Even though the invoice mentions the so called LTAPSA Agreement, on going through the records and especially the statements of Shri Siddharth Deb, Associate General Manager (one of the appellants), it is seen that the said Agreement was not produced to the Customs at the time of import of the goods. To the question "Whether the copy of the Long Term Service Agreement and Long Term Part Supply Agreement entered into with M/s. GE are furnished to the Customs authority, Shri Siddharth Deb, answered "No. Copy of the Agreement was not asked for." Mere mention of the LTPSA Agreement in the invoice will not amount to the appellants stating the entire relevant information as regards their transactions. In other words, it is the case of the Revenue that the appellants had suppressed the facts relating to the LTPSA Agreement. Even though the appellants strongly contend it, in our view, Revenue's case is strong for the following reasons:
The supply of the impugned goods to the appellants by M/s. GE is in accordance with the Long Term Service Agreement and Long Term Parts Supply Agreement. They are not actually straightforward sales transactions. The import is not an outright purchase.
9.2. We have already stated details of the Agreement in the introductory portion of this order. In such circumstances, the value declared is not a transaction value. In terms of the Agreement entered, the payments for the supply of parts are made on the basis of fixed charges and hourly charges. Moreover, the Hot Gas Path Parts are supposed to be replaced after 12500 firing hours. The price mentioned in the commercial invoice is not acted upon. This price is based on the list price mentioned in the Rotable Exchange Programme. By a mere mention of LTPSA in the invoice, how do the appellants expect the Customs to know all the intricacies involved in the Agreement?. In any case, the value declared in the Commercial Invoice and on which the duty has been paid is not the Transaction Value for the simple reason that no payment is made according to the value mentioned therein.
9.3. We would like to mention that these Agreements are very voluminous. When the goods are imported, the Customs Department has an onerous task of clearing the goods expeditiously. They are also supposed to clear the goods in accordance with law. The appellant's statement that they did not produce the Agreements because the Customs did not ask for it indicates, to say the least, a very irresponsible attitude especially when the value of the impugned goods declared by them is not the Transaction Value.
9.4. The appellants, by not producing the Agreements at the time of import and not informing the Customs about the Scheme under which the goods were supplied, had actually suppressed the relevant facts and, therefore, at the outset, we hold that the longer period is invocable.
9.5. In the industry, there is a practice of returning the used part to the original manufacturer who will repair or refurbish the old part. The manufacturer would supply the refurbished part to the customer. This has several advantages. In fact, in the website of GE, we find interesting information on refurbished parts. We are reproducing the entire page of the website.
Compressors Gas Turbine- The highlights of the program include:
Heavy Duty Gas Turbine- Competitive pricing based on remaining part's life Aeroderivative Generator GE warranty Mechanical Shorter delivery time than the standard repair cycle Motor Exchange program to reduce outage time On-Site Two purchase options: direct purchase or exchange Machining Refurbished to GE standards Refurbished Parts Parts pedigree to ensure full knowledge of component history Steam Turbine For More Information Switchgear Place a want ad Transformer Sell your capital spares Lifecycle Services Related Information Request a quote My Account Job Status It is very clear that the practice of sending the old part and receiving the refurbished parts has several advantages including cost because the customer is required only to pay the incremental cost as the returned part has got a certain value. In the industrial parlance, the old part is known as "Core" and when the core is returned and the refurbished part is received, the value of the Core is adjusted and the customer is required only to pay the incremental value. It would be worthwhile to reproduce an extract from the following website for a clearer understanding of the concept.
Certain types of auto parts can be recycled or, more specifically, remanufactured for future sale.
These parts have a core value that is used as a form of deposit on the portion of the part that can be remanufactured and that is designed to encourage return of the old part. The "core," simply put, is your old part. Returning cores can save you money on replacement parts.
Parts that may have a core value include brake shoes, brake master cylinders, water pumps, starters, alternators and air conditioning compressors.
Core Charges and Core Prices The sale of a remanufactured part involves the price of the part itself, as well as an additional core charge to encourage the return of the old part for remanufacturing purposes. The core charge, sometimes called a core price, is a form of deposit you pay until returning your old part. If you don't have the core at the time of purchase, you must pay the core charge. That charge is refunded to you when you return the core.
Let's say you buy a remanufactured water pump with a $15 core charge, but you haven't removed the old water pump yet. You must pay the core charge when you buy the part. After you replace the pump, you return the old one to the store with your receipt (which includes the core charge). As long as the old part is in acceptable condition, the store will then refund the $15.
9.6. Coming to the present appeals, we find that in terms of the Agreement, the foreign supplier is responsible for the entire maintenance of the Turbines in the Power Plant. In terms of the Agreement, after 12,500 firing hours, each Hot Gas Path Part is to be replaced. We have already mentioned the terms of the payment. As far as Customs is concerned, when any item is imported, Customs duty has to be paid on the value. The value is governed by Section 14 of the Customs Act read with the Customs Valuation Rules. Under normal circumstances, the Transaction Value is taken for assessment purposes with suitable adjustment. What is Transaction Value? In the language of the layman, the Transaction Value is the amount paid for the transaction of purchase of the goods. In the normal circumstances, it will represent a value for an outright purchase of an item. In the present case, in the above sense, there is no Transaction Value at all. However, the foreign suppliers have given Commercial Invoice indicating the value for customs purpose.
9.7. Now, let us turn to para 2.8 of the LTPSA.
2.8 SUPPLY OF CERTAIN REFURBISHED PARTS In the performance of its scope of work under this Agreement, Seller may supply Parts which have been previously installed at a power generation facility other than the Power Barge and subsequently refurbished by the Seller. Such refurbished Parts shall be warranted by Seller in accordance with the provisions of Article 8. Seller will provide reasonable documentation for purposes of Buyer's tax calculations as to those components that are new, and those that are repaired, but Buyer remains obligated to pay all taxes, import duties, value added and all other taxes, however characterized, arising from the supply, repair, refurbishment, import, delivery to the Power Plant, and use of such Parts. With respect to refurbished Parts, Seller shall furnish Buyer with information regarding the incremental value of each refurbished Part over the value of the comparable used Part that was exported in order to limit the assessment of customs duties to the incremental value of each such refurbished Part.
9.8. It is clear from the Agreements that the appellant is required to export the replaced old part while receiving the refurbished part from the foreign supplier. The above mentioned para 2.8 makes it very clear that the value furnished in the Commercial Invoice is only an incremental value and also the same was provided to limit the assessment of customs duties. This is very clear evidence indicating that the value declared at the time of import is not the true value of the goods. The Revenue was right in rejecting the said value.
9.9. Once the value declared is not found to be Transaction Value, the authorities have to go by the Valuation Rules to determine the value for assessment purposes. It is seen that Rules 5, 6, 7, 7A are not applicable to the present cases. This has been elaborately dealt with by the Adjudicating Authority. Therefore, he has invoked Rule 8 of the Customs Valuation Rules, 1988. The main objection of the appellants is that the Show Cause Notice has not invoked this Rule and, therefore, the Adjudicating Authority is going beyond the scope of the Show Cause Notice. On going through the Show Cause Notice, we find that although Rule 8 has not been invoked, there is a proposal to re-determine the assessable value by adding the value of the returned part. The value of the returned part is taken as 1/3rd of the value of the imported part under the Rotable Exchange Programme. Since this proposal is made in the Show Cause Notice, the non-mention of Rule 8 will not vitiate the same. In other words, the invocation of Rule 8 is implied in the manner in which the assessable value was proposed to be re-determined. The Adjudicating Authority has also taken recourse to Rule 9(1)(d) and Rule 9(1)(e) of the Customs Valuation Rules, 1988. The appellants strongly challenge the re-determination of assessable value on various grounds. It is the contention of the appellants that the addition to the Transaction Value in terms of the above mentioned rules should be in the form of some payment. According to them, the seller is not receiving any monetary consideration from the buyer. They have also stated that the returned part does not have any value and it should be treated only as scrap. These contentions are not sound. If the returned part is only a scrap, where is the need for indicating its value in the shipping bill as per the requirement of the US Customs? Moreover, while exporting the so called scrap, the appellants have submitted a letter explaining why there is no inward foreign exchange remittance. It is very clear that the value of the imported part is adjusted in view of the return of the used part. That is why there is no inward remittance of foreign exchange for the exported part. It is also seen that the Adjudicating Authority has invoked Rule 8 of the Customs Valuation Rules. Rule 8 indicates the residual method for arriving at the value of the imported goods when the same cannot be determined under provisions of any of the precedents. In such circumstances, the value shall be determined using reasonable means consistent with the principal and general provisions of these Rules and Sub-section (1) of Section 14 of the Customs Act, 1962. In other words, the Adjudicating Authority is going by the best judgment method. It is very clear that the value adopted by the appellants for payment of Customs Duty has been reduced on account of the re-export of old part. Further, the value of the old part is approximately 1/3rd of the value of the imported part under the Rotable Exchange Program in accordance with the declaration made to the US Customs. Moreover, the Adjudicating Authority has shown that the cost of a part on outright purchase will be approximately equal to sum of the rotable exchange price plus one third of that price. Hence, one has to arrive at the assessable value by adding the value of the returned part, which is also 1/3rd of the value of the imported part. We cannot say that the Adjudicating Authority has determined the value in an arbitrary fashion.
9.10. It has been urged that the value indicated in the Insurance Policy for the imported goods should be accepted. That value happens to be the value under the Rotable Exchange Program. The Adjudicating Authority has stated that in that case, the value should cover even the value of the returned part on the ground that the insurance amount is split between imported parts and old parts exported back to M/s. GE as both have a value of their own. Therefore, taking the insurance amount applicable only to the imported parts and arriving at the conclusion as contended by the appellant is not correct.
9.11. The appellant has referred to Notification No. 94/96 dated 16.12.1996 to contend that the intention of the Government has always been to levy duty on repair charges. This point also is not acceptable for the reason that the said Notification deals with cases where the same goods are returned after repair abroad. In the present case, even though old parts are exported, the returned part need not be the same one, which was exported. In any case, while arriving at the value for the assessment purposes, we cannot go by the intention of the Government indicated in some other Notification. We have to go only by Section 14 of the Customs Act read with the Valuation Rules.
9.12. Our attention was also drawn to an adjudication order relating to imports made by BSES, Kerala where the value as per the Rotable Exchange Program was accepted by the Adjudicating Authority. Further, it has been urged that the said order of the Adjudicating Authority has not been appealed against and/therefore, the Department is bound to follow the same. We are not impressed with this argument. The Special Counsel for the Revenue submitted that the adjudication order dated 17.04.2002 cited by the appellant is based on wrong and incorrect appreciation of the facts of the case. He relied on the ratio of the Apex Court's ruling in the case of Faridabad CT Scan Centre wherein it was held that wrong orders cannot be perpetuated with the help of Article 14 of the Constitution on the basis that such wrong orders were earlier passed in favour of some other persons and, therefore, there will be discrimination against officers if correct orders are passed against them. We are in agreement with the contention of the Special Counsel and, therefore, we hold that the Revenue is not bound by a wrong order forever.
9.13. Further, the appellants stated that there was a denial of Principles of Natural Justice as no opportunity was given for cross-examining the Finance Manager, Shri Naresh Manchanda. We find that the case is not based only the statement of the Finance Manager. There are so many other evidences to show that the value declared does not represent the Transaction Value. When there are several evidences available, the denial of cross-examination on justifiable grounds cannot vitiate the order. It is seen from the records that Shri Naresh Manchanda was no longer in the organization and also he was in abroad. Having regard to these practical difficulties, the Adjudicating Authority did not think it very important to give an opportunity for cross-examining him.
9.14. In the course of personal hearing, it was urged by the learned Advocate for the appellants that throughout the world, the price available in the Published Price List of GE is adopted. In our view, what is published is the price under the Rotable Exchange Program and we have given reasons to show that the value under the Rotable Exchange Program does not represent the value for Customs purposes as per Section 14 of the Customs Act, 1962. The appellants have not produced any evidence to show that the countries who have adopted the GATT Valuation Code like India have accepted the price available in the published Price List under Rotable Exchange Program for Customs purposes. In view of the above observations, we hold that the value as declared by the appellants for the goods imported cannot be accepted. The Adjudicating Authority has correctly determined the assessable value by adding the cost of the returned part. Hence, the re-determination of the assessable value and the consequential demand of differential duty are in accordance with law.
10. Now, let us deal with the denial of benefit of exemption Notification No. 21/2002-Cus. dated 01.03.2002 in respect of the goods imported under two Bills of Entry.
10.1. The above mentioned notification grants exemption from Basic and Additional Duty of specified goods mentioned in a Table annexed to the exemption notification. The impugned goods were sought to be cleared claiming exemption under Sl. No. 236 of the Table annexed to the Notification. The relevant portion is reproduced below:
S. No. Chapter Heading No. or sub-heading No. Description of goods Standard Rate Additional Duty rate Condition No.
236. 84 or any Chapter All goods, for renovation or modernisation of a power generation plant (other than captive power generation plant) 5% 16% 45
45.
If,-
(i) in the case of a power plant (except a nuclear power plant),-
(a) in the case of Central Power Sector Undertakings, the Chairman of the concerned Undertaking or an officer authorized by him certifies that the scheme for renovation or modernisation as the case may be, of such power plant, has been approved and an officer not below the rank of a Deputy Secretary to the Government of India in the Ministry of Power recommends, in each case, the grant of the aforesaid exemption to the goods for such scheme;
(b) in other cases, an officer not below the rank of the Chief Engineer of the concerned State Electricity Board or State Power Utility certifies that the scheme for renovation or modernisation, as the case may be, of such power plant, has been approved and an officer not below the rank of a Secretary in the State Government concerned dealing with the subject of power or electricity recommends, in each case, the grant of the aforesaid exemption to the goods for such scheme;
(ii) in the case of nuclear power plant, an officer not below the rank of a Deputy Secretary to the Government of India in the Department of Atomic Energy certifies the scheme for renovation or modernisation as the case may be, of such power plant, has been approved and recommends the grant of the aforesaid exemption to the goods for such scheme; and
(iii) in all cases, the importer furnishes an undertaking to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, to the effect that the said goods shall be used for the purpose specified above and in the event of his failure to use the goods for the renovation or modernisation of the said power generation plant, he shall pay an amount equal to the difference between the duty leviable on the said imported goods but for the exemption under this notification and that already paid at the time of importation.
10.2. In terms of the Notification, all goods, for renovation or modernisation of a power generation plant (other than captive power generation plant) are entitled for the concessional rate of duty. It is seen that at the time of import of the goods, the appellants did not produce the required certificate. In order to avail the exemption, an officer, not below the rank of the Chief Engineer of the concerned State Electricity Board or State Power Utility, should certify that the scheme for renovation or modernization has been approved and an officer not below the rank of a Secretary in the State Government concerned dealing with the subject of power or electricity recommends the grant of exemption.
10.3. The case of the Revenue is that at the time of importation, the required Certificate was not produced. It is also the case of the Revenue that the appellants misrepresented the facts to the concerned authorities for obtaining the Certificate. The objection of the Revenue that at the time of import, the Certificate was not produced is not a very strong ground for denying the benefit of Notification. There is a plethora of decisions in which various Courts and Tribunals have accepted the production of Certificate even after the importation for granting benefits. The appellant, after representing to the concerned authorities, obtained a Certificate dated 23.01.2004 to the effect that the scheme of renovation has been examined thoroughly and approval accorded for the same. The Principal Secretary, Government of Karnataka has also recommended the exemption under the said Notification. The list of spares recommended have also been mentioned. The General Manager of the Karnataka Power Transmission Corporation Ltd. has certified that the spares listed in the letter of the appellant dated 29.09.2003 are essential for the proper upkeep of the generating units. The Revenue contends that the impugned goods are not for renovation but only for upkeep. In our view, one cannot take such a narrow view. What is the meaning of renovation? To renovate means to make new. We talk of renovating a house or building etc. In the present case, it is the renovation of the Power Plant. In their letter addressed to the Government of Karnataka, the appellants have stated that they have been undertaking the renovation of the Gas Turbines at their plant. On going through that letter, we do not find that there is any misrepresentation. They have emphasised the point that after 12,500 fixed hours, renovation is necessary. We also find that the old parts are exported and the re-furbished parts are imported for replacement. In a way, this can be understood to be a sort of renovation. In any case, the State Government has accepted the proposal of the appellants and the Certificate has been issued by the Principal Secretary, Government of Karnataka, Energy Department. Once the competent authority is satisfied that the impugned goods are required for renovation, the Customs Department need not go deep into hair splitting and semantic niceties to deny the benefit of Notification. The DRI had taken up the matter with the state Government who have confirmed the approval of the Scheme. Once the scheme is approved by the State Government for the Power project, in our view, the benefit of exemption Notification cannot be denied. Therefore, we set aside the Commissioner's order denying the benefit of the Notification. In our view, the appellants have fulfilled the conditions of the said Notification and are rightly entitled for its benefit.
11. Summing up,
(i) We uphold that the re-determination of assessable value covered by the 5 Bills of Entry at Rs. 45,24,23,850/- under Rule 8 of the Customs Valuation Rules. Consequently, the differential duty of Rs. 4,20,31,824/- (Rupees four crore twenty lakhs thirty one thousand eight hundred and twenty four only) is confirmed.
(ii) The demand of Rs. 3,16,56,697/- is set aside as the appellant is entitled for the benefit of Notification No. 21/2002-Cus dated 01.03.2002.
(iii) Having regard to the facts and circumstances of the case, the penalty under Section 114A is reduced to Rs. 40,00,000/- (Rupees forty lakhs only).
(iv) The Commissioner's order holding that the impugned goods are liable for confiscation under Section 111(m) is upheld.
(v) Interest under Section 28AB is upheld.
(vi) As the penalty imposed on the appellant company is adequate, the penalty on Shri Siddhartha Deb, the Associate General Manager is set aside.
(Pronounced in open Court on 3 Aug 2007)