Custom, Excise & Service Tax Tribunal
Vrinda Engineering Pvt.Ltd, vs Coms C. Ex - Haldia on 18 July, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No. 506 of 2011
(Arising out of Order-in-Original No. 13-14/Commissioner/CE/Haldia/Adjn/2011 dated
04.03.2011 passed by Commissioner of Central Excise, Haldia Commissionerate
Kolkata).
M/s Vrinda Engineers Pvt. Ltd,
(33A, J L Nehru Road, 7th Floor, Room No. A/5 & 10th Floor,
Room No. A/6 Kolkata-700071.)
...Appellant
VERSUS
Commissioner of Central Excise, Haldia.
(25,Princep Street, 3rd Floor, Kolkata-700072.)
...Respondent
APPERANCE :
None, for the Appellant Shri S. S. Chattopadhyay, Authorized Representative for the Respondent CORAM:
HON'BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON, MEMBER (TECHNICAL) FINAL ORDER No......76183/2023 DATE OF HEARING : 18.07.2023 DATE OF DECISION : 18.07.2023 PER RAJEEV TANDON :
The Appellants have filed the present appeal assailing the Order in Original No. 13-14/Commr./CE/Haldia/Adjn./2011 dated 04.03.2011 passed by the Commissioner Central Excise Haldia. Vide the impugned order a demand of Excise Duty of Rs. 1,41,71,109, Education Cess of Rs. 2,83,423 and Secondary and Higher Education Cess of Rs. 1,41,720 was confirmed under Section 11A, alongwith direction to pay interest under Section 11AB besides imposing a penalty of Rs. 1,45,96,252 under Section 11AC of the Central Excise Act 1944.
2. M/s. Damodar Valley Corporation in January 2007 invited bids for supply and installation of main plant package for (Koderma Thermal 2 Excise Appeal No. 506 of 2011 Power Project) (2×500MW). The bid was awarded to M/s. Bharat Heavy Electricals Ltd. (BHEL). Likewise, in March 2007 M/s. NTPC invited bids for supply and installation of Coal Handling Plant Package for Simhadri Super Thermal Power Project Stage II (2×500MW). This bid was awarded to M/s. Larsen and Toubro Ltd. (L&T). Further, M/s. Damodar Valley Corporation invited bids for supply, installation and commissioning of complete main project for Durgapur Steel Thermal Power Station (2×500MW). M/s. Bharat Heavy Electricals were successful bidders for the same. The Appellant herein were appointed as sub-contractor for the aforesaid projects BHEL required the Appellants to supply boiler components of main equipments of the Mega Power Project while L&T required the Appellant to supply Technological Structures and Chutes of Coal Handling Plant of the Mega Power Project. Upon being appointed as the sub-contractor for the aforesaid, the Appellants duly informed the jurisdictional Central Excise Authorities thereof for the supply of the aforesaid equipments. They also sought from the department a clarification whether Central Excise Duty was payable on the goods that were to be supplied by the Appellants. The successful bidders M/s. BHEL subsequently in November 2008 wrote to the jurisdictional Central Excise Authorities certifying that the boiler components as would be supplied by the Appellants were required to be used for the execution of Koderma Thermal Power Project and Durgapur Steel Thermal Power Station, Steam Generator Project. The Assistant Commissioner, Central Excise Howrah West Division II vide letter dated December 23, 2008 informed that they were not entitled to exemption under Notification No. 6/2006-CE dated March 1st, 2006 as condition 3 Excise Appeal No. 506 of 2011 No. 19 under Serial No. 91 of the notification were not fulfilled. BHEL also further wrote to the authorities stating that the boiler components supplied by the Appellants were required for the execution of Koderma Thermal Power Project and Durgapur Steel Thermal Power Station Stream Generator Project and therefore, the Appellant would be exempted from payment of Excise Duty in respect of the good supplied.
3. The Appellant further vide their letter dated December 29, 2008 wrote as under to the Assistant Commissioner in respect of the reference cited supra.
a) As per Sl. No. 91 of Notification No.6/2006-CE dated March 1, 2006 all goods falling in any Chapter of the Central Excise Tariff Act, 1985 attracted "NIL" rate of duty, if supplied against International Competitive Bidding and if the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable under Section 3 of the Customs Tariff Act when imported into India.
b) Notification No. 21/2002-Cus dated March 1, 2002 as amended by Notification No. 49/2006-Cus dated May 26, 2006 exempted the goods of the description specified in column (3) of the Table and falling within the Chapter heading or sub-heading of the First Schedule to the Customs Tariff Act, 1975 specified in the corresponding entry in column (2) of the Table, when imported into India, from so much of the duty of customs and additional duty leviable thereon, as is in excess of the rate specified in the corresponding entry in columns (4) and (5) respectively.
c) The Joint Secretary to the Government of India, Ministry of Power vide his letter dated September 8, 2006 had certified, as required under Notification No. 21/2002-Cus dated March 1, 2002, that the Simhadri Stage II (1000MW) Thermal Power Project being set up by NTPC Limited in the State of Andhra Pradesh was an inter-state thermal power plant of a 4 Excise Appeal No. 506 of 2011 capacity of 1000 MW or more and that i) the power purchasing States have constituted the Regulatory Commission with full powers to fix tariffs; and ii) these States undertake, in principle, to privatize distribution in all cities in those States each of which has a population of more than one million within a period to be specified by the Ministry of Power.
d) It was evident from the certificate issued by the Joint Secretary, Government of India, Ministry of Power that the Simhadri Stage II (1000MW) Thermal Power Project being set up by NTPC Limited fell under clause (b) of column (3) of Sl. No. 400 of Notification No. 21/2006-Cus dated May 26, 2006 and that condition no. 86 of the notification was duly fulfilled.
e) NTPC Limited vide its letter (being Ref. No. CS-3530-155-2-
PAC-AMDT-02) dated September 22, 2008 had declared the appellant to be a sub-contractor and had also specified the quantity, total value, description and specifications of the goods to be supplied by the appellant.
f) Technological structures and chutes which will be supplied for execution of the Simhadri State II (1000MW) Thermal Power Project will be used for erecting coal handling plant and hence, will fall under heading 98.01 of the Customs Tariff Act, 1975 and will be exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 when imported into India. Therefore, the appellant would be entitled to the benefit of Notification No. 6/2006-CE dated March 1, 2006. They thus submitted that the Appellant should be allowed to remove the goods at "NIL" rate of duty. It was their case that unless domestic suppliers were permitted to remove the goods to be utilized in Mega Power Projects at "NIL" rate of duty, the domestic suppliers would not find it viable to supply the goods to Mega Power Projects 5 Excise Appeal No. 506 of 2011 and such good will be required to be imported leading to outflow of foreign exchange.
4. The aforesaid contentions of the Appellant were not accepted by the department and a show cause-cum-demand notice was issued to the Appellants for the period November 1st, 2008 to August 31st, 2009 inter alia stating that as the goods manufactured and supplied by the Appellant to the Project Authority fell under heading 73089090 the same were not exempted from the Duty of Customs leviable under the First Schedule of the Customs Tariff Act, 1975 and as the same were cleared without payment of duty they were not entitled to exemption under Notification No. 6/2006-CE dated March 1st, 2006. As the said goods were not exempt under the provisions of Customs Act, CENVAT duty under Rules 4, 5, 6, and 8 of the Central Excise Rules 2002 read with Section 3 of the Central Excise Act, 1944 was therefore leviable and total duty of Rs. 1,44,14,690/- (Rs. One crore, forty-four lakh, fourteen thousand & six hundred & ninety only) was demanded alongwith interest and a proposal for imposition of penalty.
5. It is the submission of the Appellant that the Technological Structures and Chutes of Coal Handling Plant of Mega Power Project and boiler components of the main plant equipment of the Mega Power Project, supplied by them are eligible for exemption from payment of Customs Duty vide Notification No. 21/2002-CUS dated March 1st, 2002 as amended. They state that the supply to the said goods fell under Sr. No. 400 of the Notification ibid and condition No. 86 stipulated thereto was duly met with. They assert that for determining eligibility, the Customs classification was relevant and it had no bearing with the 6 Excise Appeal No. 506 of 2011 classification under Central Excise Tariff Act, 1985. That the good supplied by them fall under Heading 98.01 of the Customs Tariff Act, and their classification under Sub-Heading 73089090 of the CETA was not relevant for determining the eligibility of the goods for availment of the exemption under Notification No. 21/2002-CUS dated March 1st, 2002. Further, the said goods match with the description provided under Serial No. 400 of the table thereto. They, further point out that CBEC vide F. No. 528/213/87-CUS (TU) ICD dated 08.08.87 had clarified that the basic idea underlying the creation of Tariff Item 98.01 pertaining to the project imports was simplification of assessment as all imports required for a project were subjected to a uniform rate of duty. Thus once the contractor is registered for initial setting up or substantial expansion of an existing plant the imports, supplied by the contractor were classifiable under chapter sub-heading 9801 of the Customs Tariff Act, 1975 and would be subjected to project rate of duty. The Ministry of Power, Government of India had certified the Simhadri Super Thermal Power Project, Stage II (2×500MW) as fulfilling the criteria laid down for Mega Power Project, hence the good supplied were eligible for exemption benefit. They further contend that the supplies made by them were considerable as "deemed exports", in terms of paragraph 8.2(g)/8.2(f) read with paragraph 8.4.4 and 8.6.2 of the Foreign Trade Policy 2004-09, as they satisfied all conditions thereto. Thus no duty as demanded under Section 11(A)(1) of the Central Excise Act, was payable and accordingly no interest or penalty was also leviable.
6. As for the second Show Cause Notice issued for the period September 1st, 2009 to October 31st, 2009 demanding Central Excise of 7 Excise Appeal No. 506 of 2011 Duty to Rs. 1,81,562, alongwith interest and penalty the noticee adopted similar arguments. In short it is their case that they were eligible for exemption from payment of duty for goods supplied to the Mega Power Projects as they constituted machinery or equipment parts or components of the said Mega Power Project, within the meaning of heading 9801 and the finding of the learned Commissioner that the said goods were mere building components or support structures or static not caring out any designated function or activity, were erroneous. The Technological Structures and Chutes of Coal Handling boiler components of the main plant, equipment of Mega Power Project were actual machinery or at least in any event part/components/accessory of the said machinery. Further, these parts (good supplied) were essential to the main machinery without which it was inconceivable for the machinery to be operationally relevant and were therefore duly installed alongwith the main machineries of which they were a part of. It is their case, that the interpretation rendered by the Commissioner to the scope of heading 9801 of the Customs Tariff Act is on a very narrow canvass, particularly in the light of Board's letter F. No. 528/213/87-CUS (TU) ICD dated 8th August, 1987.
7. We observe that the issue under challenge, in the present matter is no more res integra. For the goods to be entitled to exemption under Notification No. 6/2006-CE dated 13/2006, Serial No. 91 thereof, the following the conditions are required to be met with
(a) Goods to be supplied against International Competitive Bidding and
(b) Customs Duty and Additional Duty of Customs leviable on the goods are exempted when imported into India.
8Excise Appeal No. 506 of 2011
The Appellant is the sub-contractor for M/s. L&T and M/s. BHEL, who have been awarded bids for supply and installation of main plant package for Koderma Thermal Power Project (BHEL) and Coal Handling Plant Package for Shimhadri Super Thermal Power Project Stage II (L&T). The projects were duly certified by the Joint Secretary to the Government of India, Ministry of Power. The goods being component parts of the power projects merit classification under sub heading 9801 of the (Customs Tariff Act) and are rightly eligible for exemption as the said chapter concerns import of project imports of various categories and machinery items/raw material required for manufacture of goods. The manufacture and supply of the aforesaid items by the sub contractors and Appellant herein are not in dispute. Identical issue was considered by the Tribunal in the case of Cords Cable Industries Pvt. 1 Ltd. Vs. Commissioner of C. EX., Jaipur , where in the Tribunal held as under:
"5. We find that in the same set of facts came up for decision before this Tribunal in earlier cases. In Sarita Steels and Industries Ltd. v. CCE vide Final Orders Nos. 1076-1081/2010, dated 15-7-2010 [2011 (264) E.L.T. 313 (Tribunal)], the Tribunal held that when the fact that supplies are made to mega power projects and all the conditions have been fulfilled the goods which are required for execution of mega power project are categorically exempted by the said customs notification. So in Om Metals SPML JV Unit 2 v. CCE & ST, Jaipur - 2013 (298) E.L.T. 79
1. 2016 (342) ELT 264 (Tri.-Del) 9 Excise Appeal No. 506 of 2011 (Tri.-Del.), the Tribunal held that there is no Heading 9801 in Central Excise Tariff which is only in Customs Tariff. The goods manufactured in India cannot be classified under 9801, accordingly, denial of exemption on that ground is not tenable. Further, the Tribunal in Paramount Communications Limited vide Final Order dated 23-6-2016 examined the very same issue and held the denial of exemption on the ground of classification shown under Customs Notification is 9801, is not sustainable. The same ratio has been followed by the Tribunal in KEI Industries Limited vide Final Order No. 52371/2016, dated 1-7-2016.
6. In view of the above decided cases, it is clear that the denial of the exemption to the appellant is not legally sustainable. Admittedly, the condition stipulated for exemption under Notification No. 6/2006-C.E. has been fulfilled by the appellant except for the classification in column 2 of Entry No. 400 in Customs Notification No. 21/2002-Cus.As clearly noted, the classification [Heading] 9801 is not available in Central Excise Tariff and the same relates to project import, as such the denial of exemption on this grounds is legally not sustainable. Accordingly, we set aside the impugned order and allow the appeal."
8. Earlier in the case of Sarita Steel & Industries Ltd. Vs. Commissioner of Central Excise Visakhapatnam2 in identical circumstances where a Mega Power Plant was executed by BHEL,
2. 2011 (264) ELT 313 (Tri.-Bang.) 10 Excise Appeal No. 506 of 2011 certificate of the Ministry of Power was obtained and the sub-contractor engaged supplied certain materials like beams, channels, angles etc for the execution of the said Power Project the benefit of the Notification No. 6/2006 Central Excise dated 01.03.2006 was held to be admissible.
9. Also, in a like case of Industrial Perforation (India) Pvt. Ltd.3concerning supply of Cable Tray with accessories to various Thermal Power Projects, it was categorically held that the only requirement for being eligible to exemption was the need of the goods to be cleared to Mega Power Projects against International Competitive Biddings.
10. To similar finding is the decision of the Tribunal rendered in the case of Paramount Communication Ltd. Vs. Commissioner of Central Excise, Jaipur4 where such exemption benefit was allowed to insulated wires and cables. The said decision of the Hon'ble Tribunal was upheld by the Hon'ble Rajasthan High Court5.
Further, the Tribunal in the case of Paramount Communication Ltd. Vs. Commissioner of C. Ex. Jaipur4as relied by the appellant, under similar circumstances, has observed that :
3. 2020 (371) ELT 604 (Tri.-Kol.)
4. 2016 (344) ELT 1091 (Tri.-Del.)
5. 2018 (360) ELT a 324 Rajasthan High Court.11 Excise Appeal No. 506 of 2011
"9. We find that goods in question are classifiable under Chapter 85 of the Tariff. Under Central Excise Tariff there is no Heading 98.01 which exists in Customs Tariff only. Since the goods manufactured in India cannot be classified under Heading 98.01 of the Central Excise Tariff, denial of the exemption on the ground of non-fulfilment of condition of Project Import Regulation is not sustainable particularly when Condition No. 86 of the Notification No. 21/2002, dated 1-3- 2002 is fulfilled by them. Similar submissions were made by Revenue for denying the benefit of Notification 6/2006-C.E., dated 1-3-2006 on the ground of non-fulfilment of conditions of the Project Import Regulation in case of Sarita Steels and Industries Ltd. reported in [2011 (264) E.L.T. 313] and Tribunal in that case allowed the exemption under Notification 6/2006-C.E., dated 1-3-2006 to the assessee. Reference can be made to another decision of the Tribunal in the case of Om Metals SPML JV Unit 2 v. CCE, Jaipur as reported in [2013 (298) E.L.T. 79 (Tri.-Del.)]. We, therefore, hold that appellants are eligible for exemption under Notification No. 6/2006-C.E., dated 1-3-2006 and accordingly set aside the impugned order and allow the appeal."
11. We further, note that the entries in the Excise exemption Notification as availed by the assessee appellant in column No. (2) for reference of Chapter or heading specifically states "Any Chapter", which clearly implies that goods sought to be cleared by assessee under the said exemption entries may fall under any of the chapter headings of Central Excise Tariff with the only condition that they are supplied under International Competitive Bidding and which are exempted from customs duty. The observation made by the Learned Commissioner to 12 Excise Appeal No. 506 of 2011 deny the exemption that they cannot be treated as machines, spare parts or raw materials to be used in making such goods' is completely irrelevant for the reason that goods' falling under any of the chapter headings of Central Excise Tariff is exempted as stated above.
Serial No. 91 of Notification No. 6/2006-C.E., dated 1st March, 2006 provides as under :
S. Chapter Description Rate Rate Condition
No. or of goods under under No.
Heading the First the
No. or Schedule Second
sub- Schedule
heading
(1) (2) (3) (4) (5) (6)
91 Any All goods Nil Nil 19
Chapter supplied
against
International
Competitive
Bidding
Under this notification goods supplied against International Competitive Bidding are exempted subject to Condition No. 19 of the Notification. Condition No. 19 reads as under :
"19. If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India."
The exemption from Customs duty is provided at S. No. 400 of the table of Notification 21/2002-CUS dated 1-3-2002 which reads as under :
S. Chapter Description of goods Standard Additional Cond No. or rate duty rate ition Heading No. No. or sub-
heading
(1) (2) (3) (4) (5) (6)
400 9801 Goods required for setting Nil Nil 86
up of any Mega Power
13
Excise Appeal No. 506 of 2011
Project, that is to -
(a) an inter-State thermal
power plant of a capacity of
1000 MW or more; or
(b) an inter-State hydel
power plant of 500 MW or
more, as certified by an
officer not below the rank
of a Joint Secretary to the
Government of India in the
Ministry of Power.
The exemption against S. No. 400 is subject to Condition 86 which reads as under :
(a) If an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power certifies that -
(i) The power purchasing State has constituted the Regulatory Commission with full powers to fix tariffs;
(ii) The power purchasing State undertakes, in principle, to privatize in distribution in all cities, in that State, each of which has a population of more than one million, within a period to be fixed by the Ministry of Power;
and
(iii) The power purchasing State has agreed to provide recourse to that State's share of Central Plan allocations and other devolutions towards discharge of any outstanding payment in respect of purchase of power;
(b) In the case of imports by a Central Public Sector undertaking, the quantity, total value, description and specifications of the imported goods are certified by the Chairman and Managing Director of the said Central Public Sector Undertaking; and
(c) In the case of imports by a Private Sector Project, the quantity, total value, description and specifications of the imported goods are certified by the Chief Executive Officer of such project.
12. The Appellants have submitted the certificates issued by the Joint Secretary, Government of India, Ministry of Power and these certificates are recorded in the Order in Original. The Commissioner has denied the exemption under Notification No. 6/2006-C.E., dated 1-3-2006 on the ground that S. No. 400 of the Notification No. 21/2002, dated 1-3-2006 applies to goods classifiable under Heading 98.01 of the Customs Tariff and for availing the benefit of Notification 21/2002-CUS for goods of 14 Excise Appeal No. 506 of 2011 Heading 98.01 requirements of Project Import Regulation, 1986 are to be satisfied.
13. We find that the goods have been cleared by the Appellants to the specified Mega Power Projects against International Competitive Biddings and the said facts have duly been recorded in the impugned order and there is no dispute on the said facts. The notifications under which exemptions have been claimed by appellants are subject to condition that the said goods, when imported into India, are exempted from payment of customs duty. In the instant case, since the goods have been supplied for setting up expansion of Mega Power Projects, we find that the Learned Commissioner in his adjudication order has not negated the submissions made by the appellant regarding the availability of the exemptions from customs duty. Had the said goods been imported from outside India, the same would have been eligible for exemption as 'projects import' as available under the aforesaid Notification No. 21/2002.
14. We find that goods in question are classifiable under Chapter 73 of the Tariff. Under Central Excise Tariff there is no Heading 98.01 which exists in Customs Tariff only. Since the goods manufactured in India cannot be classified under Heading 98.01 of the Central Excise Tariff, denial of the exemption on the ground of non-fulfilment of condition of Project Import Regulation is not sustainable particularly when Condition No. 86 of the Notification No. 21/2002, dated 1-3-2002 is fulfilled by them. We, therefore, hold that appellants are eligible for exemption under Notification 6/2006-C.E., dated 1-3-2006 and accordingly the impugned order is liable to be set aside.
15. We further note that the Learned Commissioner has also noted that goods must be unconditionally exempted under Notification No. 21/2002-Cus. (Project Imports) when imported into India. We are of the view that the 15 Excise Appeal No. 506 of 2011 Learned Commissioner has attempted to examine the fulfilment of a condition which is not appearing in the subject excise Notification. We observe that the only condition is that goods are cleared under International Competitive Bidding for use in the specified Mega Power Projects which are exempted from customs duty. The supply of subject goods in the instant case for Mega Power Project under International Competitive Bidding is on record and not in dispute. The Appellant is legally entitled to exemption from payment of Central Excise duty and thus the duty demand is not sustainable.
16. As it is an undisputed fact that the impugned goods were supplied and used for setting up/expansion of the Mega Power Projects through International Competitive Bidding process, therefore in view of our above discussions and relying on the slew of cases some of which are cited supra, we hold that the exemption as claimed by the Appellant is admissible to them. Under the circumstances there is no merit in the order of the adjudicating authority challenged herein, which therefore needs to be set aside.
16. The impugned order passed by the Learned Commissioner is therefore dismissed as non-maintainable. The appeal filed by the assessee is allowed.
(Dictated and pronounced in the open court) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) K.M.