Customs, Excise and Gold Tribunal - Calcutta
M/S. Indian Charge Chrome Limited, M/S. ... vs Commissioner Of Customs, ... on 6 July, 2001
Equivalent citations: 2001(135)ELT593(TRI-KOLKATA)
ORDER Mrs. Archana Wadhwa, Member (J)
1. All the appeals arise out of the same impugned Order of the Commissioner of Central Excise and Customs, Bhubaneswar-I and as such are being disposed of by a common Order. Vide the impugned Order, the Commissioner of Central Excise has confiscated the Captive Power Plant imported by M/s. Indian Charge Chrome Ltd. with an option to them to redeem the same on payment of redemption fine of Rs. 80.00 crore (Rupees eighty crore) only. The benefit of exemption from Customs Duty as availed by the appellants in terms of the Notification No. 13/81-CUS dated 9.2.81 has been disallowed and the Customs Duty has been demanded on the said Power Plant Apart from that, penalty of Rs. 10.00 crore (Rupees ten crore) has also been imposed on M/s. Indian Charge Chrome Ltd.; penalty of Rs. 10.00 crore (Rupees ten crore) only on the second appellant firm, M/s. Indian Metal & Ferro Alloys Ltd.; and that of Rs. 5.00 crore (Rupees five crore) only on Dr. B. Panda, Chairman & Managing Director of both the Companies.
2. Briefly stated the facts of the case are as under:-
2.1 M/s. Indian Charge Chrome Ltd. (here-in-after referred to as ICCL) and M/s. Indian Metals & Ferro Alloys Ltd. (here-in-after referred to as IMFA) are two associated companies engaged in the manufacture of ferro alloys in two of their Units operating as DPA Units. As per the facts on records, the appellants set up 100% Export Oriented Unit (E.O.U. in short) for the manufacture of Charge Chrome and other ferro alloys. For the said purpose, a power generation plant of 108 M.W. capacity was imported and was cleared without payment of duty availing exemption under Notification No. 13/83-CUS dated 9.2.81 in terms of Hon'ble Supreme Court's Order dated 5.6.85. Import of Captive power Generation Plant was approved by Government of India, Department of Industrial Development to meet the power requirement of two 100% E.O.Us. - one to be set up by M/s. Charge Chrome Ltd. and the other already set up by M/s. IMFA. It seems that initially, a dispute as regards the importation of Captive Power Plant under the said Notification arose, which dispute travelled upto the Honourable Supreme Court and vide its Order dated 5.6.85, the Hon'ble Supreme Court held that Notification No. 13/81-CUS dated 9.2.81 is applicable to the importation of the Power Plant by the appellants. Thereafter, a Miscellaneous Application filed by the Revenue was dismissed by the Honourable Supreme Court by observing that the same seeks review of the earlier Order of the Court. We find that although all these backgrounds have been discussed in the impugned Order by the Commissioner, but the same is not very relevant to the dispute involved in the present appeals and as such, the factual position relating to importation of Captive Power Plant by the appellants can be avoided.
2.2 The dispute in the present appeal relates to the fulfilment of post-importation conditions of Notification No. 13/81-CUS which, according to the Revenue, have been violated by the appellants. Admittedly, the Captive Power Plant was allowed import in terms of letter of intent dated 26.11.84 of Government of India i.e. to meet the power requirement of two 100% E.O.Us. and the exemption from payment of Customs Duty was allowed by the Revenue under Notification No. 13/81-CUS in terms of Hon'ble Supreme Court's Order dated 5.6.85. The Power Plant was to be installed in the Bonded Premises of M/s. ICCL and power so generated was to the partly used there and the rest was to be supplied to M/s. IMFA situated at Therubali through Orissa State Electricity Board Grid.
2.3 It is not the Revenue's case that the power so generated in the Captive Power Plant has not been used by M/s. ICCL and M/s. IMFA in the production of the goods which have been ultimately exported. But their objection seems to be that the surplus power so generated in the Captive Power Plant besides catering to the needs of the afore-mentioned E.O.Us. has also been used by Orissa State Electricity Board for consumption/distribution in domestic tariff area, thus violating the condition of the Notification in question. On the above basis, show cause notices were issued to the various appellants which culminated into the impugned Order passed by the Commissioner.
3. We have heard Shri R.N. Bajoria, Senior Advocate assisted by Smt. Vijay Laxmi Mehra, Advocate for the appellants and Shri N.C. Roychowdhury, Senior Advocate assisted by Shri Prantosh Mukherjee, Advocate for the Revenue.
Without referring to the initial dispute about the importation of the Captive Power Plant which has ultimately been settled by the Hon'ble Supreme Court vide its Order dated 5.6.85 under which the appellants were allowed to import the Captive Power Plant, we find that the dispute in the present appeal relates to the fulfilment of the conditions of Notification No. 13/81-CUS dated 9.2.81 The Revenue's stand is that since the Power Plant was imported for generation of power to be used in the manufacture of charge chrome to be exported out of India, diversion of the excess power to domestic tariff area has violated the condition of the Notification. One the other hand, the appellants' contention is that the surplus power so generated could not be stored by them on account of its very nature and as such, has to be transmitted through electricity grid and sold in the domestic area.
3.1. We find from the impugned Order that no specific condition of Notification No. 13/81-CUS has been referred to by the adjudication authority, which according to him, has been violated. The entire case of the Revenue is based upon only one premises that the duty-free importation was allowed only for use in the exported products and any use towards the domestic tariff area has violated that condition thus making the appellant ineligible for the benefit of the Notification. For better appreciation of the Revenue's case, we reproduce below the relevant paragraph of the Commissioner's Order:-
"As discussed supra the captive power plant was allowed import in terms of letter of Intent dt. 26.11.84 of Govt. of India, Ministry of Industry, Deptt. of Industrial Development, Secretariat for Industrial Approval as capital goods to meet the power requirements of two 100% Export Oriented Units - one to be set up Choudwar and the other already set up by M/s. IMFA Ltd. at Therubali. Exemption from payment of Customs duty was allowed by Deptt. of Revenue under Notfn. 13/81-CUS in terms of Hon'ble Supreme Court's Order dt. 5.6.85 (supra). In view of this, the importers were required to fulfil the post-importation conditions stipulated therein, that is to say, they were required to ensure that the said power plant and all other allied materials were not used for any purpose other than those stipulated in the exemption Notfn. and/or letter of intent dt. 26.11.84 issued by Secretariat of Industrial Approval, Govt. of India. This has not been done, in as much as the impugned goods have been utilised for generation of electricity that has been sold to other units in Domestic Tariff Area. They have vehemently contended that the power requirement of 2 EOUs was about 80 MW and though, the imported power plant was for a capacity of 108 MW, it would have never generated more than 65 MW even if operated efficiently. Therefore, the CPP was only enough to meet the requirement of 2 EOUs. They have also pointed out that the Power Plant never produced beyond 65 MW and the sale of surplus power arose due to unforeseen circumstances/contingencies which arose after import of CPP. Though the above position may be true, the same is irrelevant for the present cause because after having contended before Hon'ble Supreme Court that Notfn. 13/81-CUS is applicable and adequate for their case it is not open for them to take the plea that electricity not being capable of being stored, has to be transmitted and may be sold even in Domestic Tariff Area. The plea that they have represented to various government agencies for permission in this regard is not sufficient to absolve them of their obligation to adhere to the conditions governing such duty free import. Therefore, the goods detained under Section 110 of Customs Act, 1962 by the Directorate of Revenue Intelligence, Calcutta Zonal Unit on 9.2.84 and given to M/s. Indian Charge Chrome namely, the captive power plant of 108 MW capacity are liable to confiscation under Section 111(o) of Custom Act, 1962."
3.2 Now, the question required to be decided is as to whether by selling the surplus power generated by the appellant, the Power Plant has resulted in violation of condition of Notification No. 13/81-CUS. It is seen that Notification in question grants exemption to specified goods when the same are imported for the purpose of manufacture of articles for export out of India by 100% E.O.U. It is not the Revenue's case that the Captive Power Plant imported by the appellants has not been used for generation of power by ICCL, which in turn was utilised for manufacture of Charge Chrome for export purposes. Evidently, electricity by its very nature has to be consumed instantaneously and cannot be stored and as such, whatever power is generated, the same is consumed by the appellants for manufacture of Charge Chrom and the rest is fed into the Grid for supply of electricity to IMFA. The electricity supplied by ICCL is appropriated by Orissa State Electricity Board and is pooled in the Grid System and the same cannot be segregated for the purpose of distribution to any particular consumer. As such, it is not possible to match the electricity produced at a given point of time with that of the electricity consumed at the same point of time. There will always be either surplus or deficit. The appellants' contention that in the absence of a restrictive clause in the Notification that the imported goods will be solely or exclusively (Emphasis provided) used for the purposes of manufacture of goods for export, no violation of any conditions of the Notification can be said to have been committed.
3.3 It is seen that the Tribunal in the case of C.C., Mumbai vs. Shefali Arts reported in 1999 (35) RLT-644 (CEGAT) has held that where the Notification made the exemption from duty conditionally upon the imported machine being "used for the purpose of export", where a part of the production was sold locally, the benefit of the exemption was available, since the words - "only", "exclusively" or "entirely" - were not used in the Notification. We find that Notification No. 13/81-CUS nowhere uses the expression that the Power Plant in question should be exclusively used for the production of power to be used in the export of products. The appellants are right that when there is a surplus power and when the same was unable to be stored, the use of the same in the domestic tariff area should not disentitle them from the benefit of the Notification in question.
3.4. The appellants have also referred to a decision of the Hon'ble Supreme Court in the case of Union of India vs. Tata Iron & Steel Co., Jamshedpur reported in 1977:ELT (J-61) wherein by interpreting the Notification No. 30/60 granting exemption to steel ingot in which duty-paid pig iron was used, the Hon'ble Supreme Court observed that in the absence of the words - "entirely", "exclusively" or "only", it was sufficient for the assessee to show that duty-paid pig iron was used along with non-duty-paid "pig iron". The Hon'ble Supreme Court also observed in para 23 of the said Order that if the intention of the Government were to exclude the exemption to duty-paid pig iron when mixed with other materials then the notification would have used the expression "only" or "exclusively or "entirely" in regard to duty-paid pig iron.
3.5. The appellants have referred to a number of other similar notifications, being Notification No. 173/79-CUS dated 7.8.79, Notification No. 51/96-CUS dated 23.7.96 and Notification No. 39/96-CUS dated 23.7.96 - wherein the word, 'exclusively', has been used in contradistinction to the Notification involved in the present case. We also find that the Hon'ble Calcutta High Court in the case of Nayak Associates vs. U.O.I. reported in 1991 (55) ELT-189, after taking into account the various precedent decisions, has held that the benefit of exemption Notification No. 70/76 granting exemption to Mill Board could not be denied on the ground that the same has been manufactured out of mixed waste paper and jute stalk and paddy straw along with caustic soda on the ground that the Notification No. 70/76 did not use the expression - "only" or "exclusively" or "entirely".
By applying the ratio of the above decisions to the facts of the instant case and in view of the admitted use of power in the manufacture of the exported product, we are of the view that the use of surplus power in the domestic tariff area will not amount to contravention of the provisions of Notification No. 13/81-CUS for arriving at the above conclusion. We also take account issued by the Ministry of Commerce as contained in their letter No. 1/1/98-EP dated 12.12.99 and as contained in their letter No. 2(1)/1-1/92/9088 dated 16.11.99. In para 3 of the said letter, it reads as follows:-
"3. Deptt. of Commerce has since finalised the procedure for sale/supply of surplus power in the DTA by 100% EOU/EPZ units and has advised this Office that pending requests of the unit are to be considered in the light of the guidelines and the proposal to be submitted for further consideration of the BOA."
Para 4 of the said letter permits 100% EOU to sale/supply surplus power in the DTA in keeping with the guidelines issued by the concerned power utility agency. In view of the foregoing, we hold that the sale of surplus power has not resulted any contravention of the conditions of the Notification justifying denial of the benefit of the same and confiscation of the Power Plant in question. There is also no justification for imposition of personal penalties upon the appellants. The impugned Order is accordingly set aside and all the appeals are allowed with consequential reliefs to the appellants.
(Pronounced in the Court)