Custom, Excise & Service Tax Tribunal
M/S. Bses Kerala Power Limited vs Commissioner Of Customs, Chennai on 13 June, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.C/252/2007/MAS
[Arising out of Order-in-Original No.78/2007 (ACC) dated 28.3.2007 passed by the Commissioner of Customs, Chennai ]
For approval and signature:
Honble Mr. P.G. CHACKO
Member (Judicial)
Honble Mr. P. KARTHIKEYAN
Member (Technical)
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1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT(Procedure) Rules, 1982?
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2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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3.
Whether the Members wish to see the fair copy of the Order?
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4.
Whether Order is to be circulated to the Departmental Authorities?
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M/s. BSES Kerala Power Limited
Appellants
Versus
Commissioner of Customs, Chennai
Respondent
Appearance:
Shri S. Jaikumar, Adv.
Shri M. Karthikeyan, Const.
for the Appellants Shri P.R.V. Ramanan, Special Consultant for the Respondent CORAM:
Mr. P.G. Chacko, Honble Member (Judicial) Mr. P. Karthikeyan, Honble Member (Technical) Date of hearing : 13.06.2008 Date of decision : 13.06.2008 FINAL ORDER NO.____________/2008 Per P. KARTHIKEYAN This appeal filed by M/s. BSES Kerala Power Limited (BKPL), Cochin is directed against the order of the Commissioner, Customs, Airport, Chennai. In the impugned order, the Commissioner had enhanced the value of Hot Path Parts (HPP) being part of the Gas Turbine Generator(GTG) re-imported after repair. Consequent demand of differential duty of Rs.1,27,75,187/- under Section 28 (2) of the Customs Act, 1962 (the Act), the applicable interest under Section 28AB of the Act, confiscation of GTG under Section 111 (m) of the Act and imposition of penalty equal to differential duty imposed on BKPL under Section 114A of the Act vide the impugned order are challenged.
2. Brief facts of the case are that in the year 1998, BKPL had imported a naphtha based power plant of 165 MW capacity from M/s. General Electric, Houston (GE). It comprised three Gas Turbine Generators. One of the GTGs, namely, GT1 (191104) was sent to the manufacturer of the power plant GE for repair. When GE opened the GT1 (191 -104) for repairs as per guarantee, a major component hot section path (HPP) was found damaged. They replaced the HPP and returned the GTG. BKPL cleared the repaired GTG under Bill of Entry No.3973 dated 1.7.04 in terms of Notification No.94/96-Cus dated 16.12.96 which provided for exemption in respect of goods exported abroad and imported after repairs in excess of duty payable on the fair cost of repair including cost of materials replaced and, onward and return freight and insurance. The invoice value for the GTG considering the repair charges raised by GE was US $ 2719073.04. In the commercial invoice filed with the Customs, the repair charges showed was US $ 2591,914.89. It was ascertained that GE had three modes of sale of HPP; one, brand new HPP, another, outright sale of refurbished HPP and the third, refurbished HPP under the Rotable Exchange Programme (REP). REP was the cheapest of the three options where the customer had to surrender the HPP being replaced to GE. In the impugned order, the Commissioner found that HPP was undervalued by the cost of the replaced HPP. On an earlier occasion when an HPP was damaged and BKPL had imported a HPP under the REP, the assessee had surrendered the worn out HPP and was charged for HPP under REP. The returned (exported) HPP had been assessed in the Shipping Bill at one third of the value of the new HPP.
3. In the appeal filed by BKPL, the main contention raised is that recourse to CVR in determining the value of HPP and the computation of the amount subject to customs duty in terms of Notification No. 94/96-Cus was incorrect. The notification prescribed a self contained procedure for determination of the amount on which duty due on re-import of repaired goods was to be paid. This amount was the aggregate of fair cost of repair, cost of materials used for replacing worn out parts, the cost of freight and insurance for transportation of the equipment for repair by the manufacturer and return to the importer. Assessee also claimed refund of the CVD already paid. Imported goods are repaired goods. Had they been repaired in India, central excise duty would not have been payable on them. Therefore, CVD was not liable to be paid on such goods on import. This prayer of the assessee is allowed.
3.1 The appellant has challenged the valuation of HPP adopted by the Commissioner in the impugned order mainly on the ground that second hand machinery on import could not be treated as identical or similar to any goods previously imported. Import of HPP by GMR Energy Ltd., Bangalore, was at a lower price than the price at which BKPL itself had imported HPP previously under REP, the price of which had been adopted for valuation of subject HPP under Rule 5 of CVR. As per CVR when Rule 5 was adopted lowest price among the imports of identical goods had to be adopted. The Commissioner had determined the value erroneously. There was significant time gap of four months between the imports compared. Two second hand goods could not be compared. Various case law were cited in support of all the arguments. It was argued that HPP fitted in GTG could not be isolated and separately valued for assessment by comparing the price of another HPP. Wisdom of the Commissioner is assailed in considering refurbished HPP as identical in all respects including physical character, quality and reputation on the basis that both were refurbished with the same condition and performance guarantee. The appellants were at a loss to understand the wisdom of the Commissioner and the reasoning behind the above conclusion. It was woeful that the Commissioner had tried to justify his above scientific conclusion. It was pathetic to know that the Ld. Commissioner had suffered from selective amnesia. The Commissioner had made a ridiculous proposition in observing that, as both the HPP imported by the appellants as a spare and as a replacement built in the GTG during repair, would work for a minimum of 12500 firing hours and as both of them carried one year warranty from GE, they were to be considered identical. They argued that in the light of Rule 5 (3) of CVR, the price for import of HPP under REP by GMR in March, 2004 had to be accepted. BKPL had purchased HPP in March, 2004 on outright basis. Citing an email of one Shri Narayan Das of GE dated 30.05.05, BKPL argued that the HPP purchased by GMR was not valued at incremental value of the refurbished part. The assessment of HPP was not questioned by the revenue and therefore, in the light of the ratio of the judgments of the Apex Court in the case of Priya Blue Industries Ltd Vs. Commissioner of Customs (Preventive) reported in 2004 (172) ELT 145 (SC) and Collector Vs. Flock (India) Pvt. Ltd., reported in 2000 (120) ELT 285 (S.C.), the original assessment could not be disturbed. Appropriate customs duty was paid at the time of import in terms of the Notification No. 94/96-Cus dated 16.12.96. The show cause notice was barred by limitation. They assailed imposition of penalty as uncalled for.
4. We have carefully considered the case records and the submissions by both sides. The issue involved is valuation of the goods re-imported after repairs abroad. In cases where goods are exported and re-imported after repairs, Notification No. 94/96-Cus. dated 16.12.96 provides exemption from payment of duty on the value of the imported goods in excess of the fair cost of repairs, cost of materials replaced, the freight and insurance for transport of the goods to the foreign country and return. The portion of the Notification relevant for adjudication of the dispute is reproduced below:
Re-import of goods exported under duty drawback rebate of duty or under bond Exemption In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance, (Department of Revenue), No. 97/95-Customs, dated the 26th May, 1995 the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within any Chapter of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table hereto annexed (hereinafter referred to as the said Table) when re-imported into India, from so much of the duty of customs leviable thereon which is specified in the said First Schedule, the additional duty leviable thereon under section 3 of the said Customs Tariff Act and special duty of customs leviable under sub-section (1) of section 68 of the Finance (No. 2) Act, 1996 (33 of 1996), as is in excess of the amount indicated in corresponding entry in column (3) of the said Table. TABLE Sl. No. Description of goods Amount of duty (1) (2) (3)
1.
Goods exported -
(a) under claim for drawback of any customs or excise duties levied by the Union Amount of drawback of customs or excise duties allowed at the time of export
(b) under claim for drawback of any excise duty levied by a State Amount of excise duty leviable by State at the time and place of importation of the goods
(c) under claim for rebate of Central excise duty Amount of rebate of Central excise duty availed at the time of export
(d) under bond without payment of Central excise duty Amount of Central excise duty not paid
(e) under duty exemption scheme (DEEC) or Export Promotion Capital Goods Scheme (EPCG) Amount of excise duty leviable at the time and place of importation of goods and subject to the following conditions applicable for such goods -
(I) DEEC book has not been finally closed and export in question is delogged from DEEC book.
(II) In case of EPCG scheme the period of full export performance has not expired and necessary endorsements regarding reimport have been made.
(III) The importer had intimated the details of the consignment re-imported to the Assistant Commissioner of Central Excise in charge of the factory where the goods were manufactured and to the licen- sing authority regarding the fact of re-importation and pro- duces a dated acknowledge- ment of such intimation at the time of clearance of goods.
(IV) The manufacturer-exporters who are registered with Central Excise Department may be permitted clearance of such goods without payment of Central Excise duty under transit bond to be executed with the customs authorities, such bond will be cancelled on the production of certificate issued by Central Excise authorities about receipt of re-imported goods into their factory.
2. Goods, other than those falling under Sl. No. 1, exported for repairs abroad Duty of customs which would be leviable if the value of re-imported goods after repairs were made up of the fair cost of repairs carried out including cost of materials used in repairs (whether such costs are actually incurred or not), insurance and freight charges, both ways,
3. Goods other than those falling under Sl. Nos. 1 and 2 Nil.
[Notification No. 94/96-Cus., dated 16-12-1996] In the instant case, GTG1 (191-194) was sent for repair by the manufacturer M/s. GE, Houston. The importer had also sent a spare combustor for replacement. On tear down inspection of the GTG by GE, they found that the HPT/HPP (Hot path part) was damaged. The manufacturer replaced it with a refurbished HPP and retained the removed HPP. The cost of refurbished HPP was found from the policy of GE and its practice in respect of repairs of worn out HPP by replacement. In the case of GMR Energy Ltd. and BKPL the price charged from the customer was less by the cost of the replaced HPP. In the impugned order, the Commissioner determined the transaction value of the HPP under Customs Valuation Rules, 1988 for the purpose of computation of assessable value in terms of exemption Notification No. 94/96-Cus dated 16.12.96. He rejected the value declared by the appellants in the invoice and enhanced it to the value of a similarly refurbished HPP imported by the appellants in March, 2004. The Commissioner found that the two imports were within three to four months of each other, both the HPPs were manufactured by the same company, had originated from the same country, had warranty for the same period and had to be replaced within 12500 firing hours in terms of the warranty provisions covering the imported GTG and the power plant. Both the HPPs had the same reputation and were of the same quality. They were identical goods for the purpose of Rule 5 of CVR. The Commissioner rejected the value of HPP accepted by the department in respect of import of identical equipment contemporaneously by GMR Energy Ltd., Bangalore for their Mangalore plant. This was because that import was under an agreement between GMR and GE for maintenance and service of GTG. The terms of the impugned import were different from that of import by GMR. The notification prescribed a self contained procedure for determination of the amount on which duty due on re-import of repaired goods was to be paid. This amount was the aggregate of fair cost of repair, cost of materials used for replacing worn out parts, the cost of freight and insurance for transportation of the equipment for repair by the manufacturer and return to the importer. The assessment required is that of GTG1 (191-194) which had been exported abroad and re-imported after repairs. Assessment was not of HPP under the Customs Act. Taking recourse to Section 14 and provisions of CVR were uncalled for and unjustified. The exercise undertaken by the Commissioner to determine the transaction value of HPP under CVR is not in terms of the legal provisions or legal requirement for assessment of the impugned import. Therefore, the demand raised on the appellants is not sustainable. Accordingly, we set aside the impugned order and allow the appeal filed by BKPL as regards demand of differential duty and consequential levies.
5. As regards the claim for refund of CVD paid on GTG, the revenue submitted that the importer has not followed the proper course for the same. We find that the relevant notification does not exempt the impugned import from CVD. Moreover as per the ratio of Priya Blue Industries (supra) and Flock India (supra), refund of duty paid on assessment of imported goods cannot be claimed without challenging the assessment. The Hoble Apex Court had observed in Priya Blue Industries (supra) as follows:
Once an order of assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an appeal that order stands. So long as the order of assessment stands the duty would be payable as per that order of assessment.
Therefore the claim for refund of CVD in the appeal is not sustainable and this prayer is rejected.
6. Before parting with this case, we would like to make the following observations which we consider are essential in the interest of the decorum of proceedings before the Tribunal. In the instant appeal we find that the appellants have made vitriolic remarks and observations with acidic sarcasm, devoid of elementary courtesy while referring to the adjudicating authority and his decision. We fail to understand why such unsavoury comments find place in an appeal addressed to us. The appellants have not, in our view, taken the right and obvious ground to challenge the impugned order (appeal is not allowed on a ground canvassed in the appeal) while assailing the wisdom of the Commissioner. Describing the reasoning and decision in the impugned order as woeful, pathetic, ridiculous etc and questioning his wisdom, we find is totally uncalled for. If we sustain the impugned order, the above attributes shift to our decision and findings. We are at a loss to understand why the appellants, instead of assailing the infirmities in the order, have chosen to abuse the adjudicating authority. We strongly condemn this practice. We hope that the Counsel shall in future guide their clients suitably and do not let the debate before us descend to despicable levels.
(Dictated and pronounced in open court) (P.KARTHIKEYAN) (P.G. CHACKO) MEMBER (T) MEMBER (J) swamy ??
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