Customs, Excise and Gold Tribunal - Mumbai
Nuclear Power Corporation Of India Ltd. vs Commissioner Of Customs on 12 April, 2007
Equivalent citations: 2007(120)ECC380, 2007ECR380(TRI.-MUMBAI), 2007(216)ELT412(TRI-MUMBAI)
ORDER K.K. Agarwal, Member (T)
1. The appellant, in this case, is Nuclear Power Corporation of India Limited, a Central Government Undertaking. They have imported diesel engines set along with lifting tools under high sea sales agreement entered into with M/s. L & T Ltd., Mumbai and applied for registration of the aforesaid high sea sales agreement as contract under Project Import Regulations, 1986. They claimed assessment under Chapter heading 98.01 relating to project import and claimed benefit of exemption under Sr. No. 401 of Notification No. 21/2002-Cus which provides for nil rate of duty in respect of goods required for setting up of a Nuclear Power Project specified in List No. 43 having capacity of 440 MW and more as certified by an officer not below the rank of Joint Secretary to the Government of India in the Department of Atomic Energy. The imports were subjected to condition No. 87 which further provides that "(a) in case of imports by the constituent units of the Department of Atomic Energy, the quantity, total value, description and specifications of the imported goods are certified by an officer not below the rank of Joint Secretary to the Government of India in the Department of Atomic Energy" and "(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." It is their submission that under list No. 43 they are one of the power plant specified and that DG Sets imported by them have been dully certified both by an officer of the rank of Additional Secretary to the Government of India as well as the Chairman and Managing Director of Nuclear Power Corporation of India Limited. These facts are also not disputed by the department. However, they have been denied the benefit of exemption on the ground that D.G. sets are not integral and functional part of the atomic power plant and therefore were not eligible for nil rate of duty under Sr. No. 401 but were liable to be assessed as goods required for captive power plant of 5 MW or more as power generated by DG Sets was for captive use in the said atomic power project. The Commissioner (Appeals) in his impugned order has held that recommendation of concerned Ministry/Department on eligibility of any goods to benefit of Project Import is not the final say in the matter and the lower authority has to satisfy himself on eligibility of goods on Project Import benefit. DG sets required for setting up of Captive Power Plant in the premises of Nuclear Power Plants are having separate identity, and for this reason they cannot be considered as integral parts of Nuclear Power Plant. He also relied upon the clarification given by the Board in the case of M/s. GSFC and M/s. Zauri Agro Chemicals where exemption to DG Sets as part of Fertilizers Projects was disallowed. It was held that DG Sets were imported to supply power to some selected equipments, in case of power failure and for this reason the same cannot be called integral part of the Nuclear Power Plant.
2. The learned Consultant, Shri Z.B. Nagarkar for the appellants submits that requirement of installation of DG Sets is as per requirement of the Atomic Energy Regulatory Board, who grants permission for operation of the Nuclear Power Plant and until DG Sets are installed, power plant cannot be made operational. A copy of letter to this effect written by Shri R.K. Vyas, Deputy General Manager (CMM) of Nuclear Power Corporation of India Limited was referred to in support thereof. Attention was also invited to the "AERB Safety Guide" issued by the Board of Atomic Energy on Emergency Electric Power Supply Systems for Pressurised Heavy Water Reactor' which prescribed the safeguard which has to be incorporated in the project before it is cleared for installation.
3. Para 3.2.1 of this Guide required for provision for emergency electric power supply system which should be designed to ensure the availability of power supplies to equipment and systems that are essential to:
(a) Shutdown the reactor;
(b) Maintain the reactor in safe shutdown state;
(c) Containment isolation;
(d) Reactor core cooling; and
(e) Prevent significant release of radioactive material to the environment under DBE.
It was submitted that certain portion of Nuclear Power Plant cannot be shutdown even for a second as it might result in release of radioactive material to the environment and before a project is cleared, they have to establish functionality of the plant without any break for which they have to demonstrate that they have a system to ensure uninterrupted power supply. It was therefore submitted that DG Sets were essential for the initial setting of plant without which project will not be allowed to be operational.
4. As regards the lower authorities' reference to clarification issued by the Ministry of Finance in the case of M/s. GSFC and M/s. Zuari Agro Chemicals, it was submitted that the issue was different as in the M/s. GSFC case, assessee was claiming concessional rate of duty for DG Sets to be used in the captive power plant and it was opined by the Ministry of Finance that their power plant cannot be considered as captive power plant as it was a dependent upon supply of steam from other units. As regards Tribunal's decision in the case of Zuari Agro Chemicals Ltd. v. CC, Goa 2002 (149) ELT 381 (Tri.Mum), it was submitted that the issue in this case was different as captive power plant was being installed not as a requirement for initial setting up of fertilizer plant but for expansion and since the electricity was not easily available it wanted to augment the supply of power through its captive power plant and in that case the Tribunal held that since the power could be procured from the power grid and other sources, it cannot be said that the fertilizer plant cannot be run without captive power plant and therefore it cannot be considered as part of the project. However, in the present case captive power plant is required for the initial setting up of project and project cannot be made operational unless they have a captive power plant in place as per requirement of Atomic Energy Regulatory Board and therefore it has be to considered as part of the nuclear power plant project.
5. The learned SDR, however, submits that just because the appellants want to be extra cautious and provide for safety, it does not mean that the captive power plant was a part of the project even though it may be statutory requirement for setting up of a plant. It was submitted that the Tribunal's decision in the case of Zuari Agro Chemicals Ltd. v. CC, Goa cited supra was no different, as in that case captive power plant was also needed to take care of emergency situation due to failure or break down of power supply. He refers to the Order-in-Original passed in this case in support of his claim.
6. We have considered the submissions. We find that in a matter like setting up of Nuclear Power Plant where uninterrupted power supply is to be ensured so as to prevent any release of radio active material to the environment, it has be to be considered that captive power plant is a part of project without which the project cannot be cleared and made operational as per Government of India, Board of Atomic Energy Guidelines. As rightly submitted by the learned Consultant for the appellants that Board's clarification in the case of M/s. GSFC plant was on different footing, where the assessee themselves claimed it to be part of the captive power plant and not as part of the project and this was denied. Similarly, the Tribunal decision in the case of M/s. Zuari Agro Chemicals Ltd. v. CC, Goa cited supra is also distinguishable, inasmuch as their captive power plant was required for pending initial production capacity by providing extra power and not for meeting emergency situation. In fact, Order-in-Original referred to by the learned SDR itself as refers to the minutes of Tariff Conference of Collectors held in April, 1985 wherein "the Conference held that D.G. Sets for an uninterrupted power supply and to protect vital installation, when forming part of the initial set up/substantial expansion would be eligible for a assessment under heading 84.66 of CTA, 1975. However, when the D.G. Sets are imported by the importers alone as stand by Generators then the importers will not be entitled to such facility." In the present case, it is not disputed that the DG Sets were required as part of initial set up and this fact is also borne out by the Deputy General Manager of Nuclear Power Corporation of India Limited' letter dated 9th December, 2003. In fact, since the operation of plant was held up on account of delay in clearance of DG Sets, a request was made for early clearance and DG Sets were provisionally cleared under bond so that plant can be made operational. In view of this, we hold that DG Sets have to be considered as part of project and entitled to benefit under Sr. No. 401 of Notification No. 21/2002-Cus. The Commissioner (Appeals)'s order is therefore set aside and the appeal is allowed in the above terms.
(Pronounced in court)