Custom, Excise & Service Tax Tribunal
Gmr Hyderabad Vijayavada Expressway ... vs The Principal Commissioner Customs ... on 24 March, 2026
C/20834, 20835, 20882/2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 20882 of 2019
(Arising out of Order-in-Original No. BLR-CUSTM-AIR-342/2019
dated 21.05.2019 passed by the Commissioner of Customs, Airport &
Air Cargo Complex, Bangalore.)
M/s. Indra Sistemas India
Private Limited, Appellant(s)
14th Floor, Eros Corporate Tower,
Nehru Place, New Delhi - 110 019.
VERSUS
Commissioner of Customs,
Airport and Air Cargo
Complex, Respondent(s)
Air India Sats Air Freight Terminal,
KIAL, Devanhalli,
Bangalore - 560 300.
WITH
Customs Appeal No. 20834 of 2019 &
Customs Miscellaneous Application No. 20495 of 2025
Customs Miscellaneous Application No. 20532 of 2025
(Arising out of Order-in-Original No. BLR-CUSTM-AIR-342/2019
dated 21.05.2019 passed by the Commissioner of Customs, Airport &
Air Cargo Complex, Bangalore.)
M/s. GMR OSE Hongund Hospet
Highways Pvt. Ltd.,
(Presently OSE Hongund Hospet
Highways Pvt. Ltd.) Appellant(s)
New Udaan Bhawan Ground Floor,
Opposite T3 Terminal,
Indira Gandhi International Airport,
New Delhi - 110 037.
VERSUS
Commissioner of Customs,
Airport and Air Cargo
Complex,
Air India Sats Air Freight Terminal, Respondent(s)
KIAL, Devanhalli,
Bangalore - 560 300.
AND
Customs Appeal No. 20835 of 2019
(Arising out of Order-in-Original No. BLR-CUSTM-AIR-342/2019
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dated 21.05.2019 passed by the Commissioner of Customs, Airport &
Air Cargo Complex, Bangalore.)
M/s. GMR Hyderabad
Vijayavada Expressway Pvt.
Ltd.,
New Udaan Bhawan Ground Floor, Appellant(s)
Opposite T3 Terminal,
Indira Gandhi International Airport,
New Delhi - 110 037.
VERSUS
Commissioner of Customs,
Airport and Air Cargo
Complex, Respondent(s)
Air India Sats Air Freight Terminal,
KIAL, Devanhalli,
Bangalore - 560 300.
APPEARANCE:
Mr. Ravi Raghavan with Ms. Purvi Asati and Ms. Ashwini Nag,
Advocates for the Appellant
Mr. Rajat with Ms. Shohini, Advocates for the Appellant
Mr. M. Sreekanth, Assistant Commissioner (AR) for the Respondent
CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE MR PULLELA NAGESWARA RAO,
MEMBER (TECHNICAL)
Final Order No. 20395 to 20397 /2026
DATE OF HEARING: 13.11.2025
DATE OF DECISION: 24.03.2026
PER : DR. D.M. MISRA
Two miscellaneous applications are filed; the first one
No.C/20495/2025 is for change of cause title from M/s. GMR Ose
Hongund Hospet Highways Private Limited to M/s. Ose Hongund
Hospet Highways Private Limited pursuant to the issuance of
incorporation certificate dated 09.09.2019 by the Registrar of
Companies. Consequently, the miscellaneous application is
allowed and the cause title be changed from M/s. GMR Ose
Hongund Hospet Highways Private Limited to M/s. Ose
Hongund Hospet Highways Private Limited.
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The second application No. C/20532/2025 has been filed to
include certain additional documents viz. Share Purchase
Agreement dt. 23.03.2016 and other documents, for which the
learned AR for the Revenue has no objection. Consequently, the
said miscellaneous application is also allowed and the documents
are taken on record.
2. The present three appeals are filed against the Order-in-
Original No.BLR-CUSTM-AIR-342/2019 dated 21.05.2019 passed
by the Commissioner of Customs, Airport & Air Cargo Complex,
Bangalore.
3.1. Briefly stated the facts of the case are that on the basis of
intelligence that the appellant M/s. Indra Sistemas India Pvt.
Ltd. (appellant-1) imported "Toll collection and traffic control
equipments' during the period 2012 claiming benefit of
exemption Notification No.12/2012-Cus dated 17.03.2012 from
payment of duty which is not admissible to them, investigation
was initiated by recording statements of various persons
connected with the said import and installation of the goods. On
completion of the investigation, it was alleged that Indra
Sistemas had imported various items of toll management
systems against 11 Bills of Entry during the period 2012-13
claiming exemption under Sl.No.368 of Notification No.12/2012-
Cus dated 17.03.2012. It was found by the investigating officers
that the conditions mentioned under the said notification
particularl Sl.No.9(a)(iii) and clause (b) are not fulfilled. During
the course of investigation on the reasonable belief that the
appropriate applicable duty has not been paid on the imported
goods as part of the toll management system, installed at
various locations by wrongly availing benefit of Notification
No.12/2012-Cus. dated 17.03.2012 which were handed over to
the main contractors before expiry of a period of 5 years without
compliance of the said notification, the toll collection and traffic
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control equipments located at various places were placed under
seizure and for safe custody, handed over to the authorised
persons under supratnama during the pendency of the
adjudication.
3.2. Consequently, show-cause notice was issued to them on
07.06.2018 with proposal for confiscation of the goods seized
under Section 111(o) of the Customs Act, 1962, recovery of the
total duty of Rs.1,59,07,360/- along with interest and penalty in
terms of provisions of Notification No.12/2012-Cus dated
17.03.2012 as amended read with Section 125(2) of the
Customs Act, 1962. On adjudication, the learned Commissioner
confirmed the duty demanded in terms of Section 125 of the
Customs Act, 1962; confiscated the goods seized under Section
111(o) and Section 120(2) of the Customs Act, 1962 with a
proposal for redemption of the same on payment of fine;
imposed penalties on all the appellants under various provisions
of Customs Act, 1962. Hence, the present appeals.
4.1. At the outset, the learned advocate appearing for the
appellant-1 has submitted that the appellant is engaged in
carrying out projects such as Toll Management System (TMS),
transport and traffic, air traffic management, Defence and
security. Pursuant to its business activities in India, the
appellant-1 had entered into contracts for supply and installation
of TMS for road construction projects executed by main
contractors viz. M/s. GMR OSE Hongund Hospet Highways
Private Limited and M/s. GMR Hyderabad Vijayawada
Expressway Private Limited (collectively referred to as
appellant-2), both on 16.02.2012. The said contract relates to
supply, installation, commissioning and maintenance of TMS at
Hongund Hospet at NH-13 and at NH-9, respectively. It is his
contention that pursuant to the said agreement and in discharge
of their obligation under the said contracts for installation of the
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TMS, appellant-1 had imported various goods and equipments
related to toll management from its parent company M/s. Indra
Sistemas, Spain and few unrelated foreign vendors. The
appellant-1 availed benefit of Sl.No.368 of the exemption
Notification No.12/2012-Cus dated 17.03.2012 on import of
specified toll management equipment covered under the
exemption notification after following the procedure prescribed
under the said Notification. They have fulfilled all the conditions
mentioned in the said notification at the time of its import and
also they have furnished necessary undertaking to the Deputy
Commissioner of Customs that they shall use the imported goods
exclusively for construction of the roads and they shall not sell or
otherwise dispose of the said goods in any manner for a period
of 5 (five) years from the date of their importation.
4.2. Learned advocate has further submitted that there is no
dispute of the fact that the appellant-1 was duly appointed as
sub-contractor by GMR. M/s. GMR and M/s. National Highways
Authority of India (NHAI) recognise the appellant as sub-
contractor at all times and had issued requisite letters /
certificates to this effect. It is practically impossible to have the
names of all sub-contractors in the main concession agreement
as the sub-contractors are usually selected at a later stage as
has been held by the Tribunal in the case of Schlumberger Asia
Services Ltd. Vs. CC [2015(2) TMI 1001]. Further, he has
submitted that they had supplied the imported goods exclusively
for the identified projects, which are duly installed in the said
projects for its use in the project which is covered under the
exemption notification, a fact not disputed by the Revenue and
evident from the certificate granted to the appellant by NHAI.
Therefore, the allegation of contravention of the condition of the
said Notification is improper. In support, they referred to the
judgment in the case of Hindustan Constructions Co. Ltd. Vs. CC,
Tuticorin [2016(12) TMMMI 762 (Tri. Chennai)]. Further, he has
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submitted that in the present case, demand is under Section 125
of the Customs Act, which is not correct. In support, they
referred to the judgment in the following cases:
i. Nalin Chokse Vs. CC [2025(391) ELT 163 ]
ii. Fortis Hospital Ltd. CC [2015(318) ELT 551 (SC)]
iii. Navayuga Engineering Co. Ltd. Vs. UOI [2024(390) ELT 3
(SC)]
5.1. Learned advocate Shri Ravi Raghavan appearing for the
appellant-2 has submitted that they were incorporated to
undertake and perform the obligations towards execution of the
contract for construction, operation and maintenance of the
Hongund-Hospet portion of the NH-13 and Hyderabad-
Vijayawada portion of the NH-9 respectively in terms of the bid
awarded by the M/s. National Highways Authority of India
(NHAI). They have entered into the Concession Agreements
dated 09.10.2009 and 22.03.2010 with NHAI whereunder the
appellant-2 was granted the exclusive rights to construct,
operate and maintain the above mentioned part of the NH-13
and 9. This project was undertaken by the appellant-2 on the
understanding of Design, Build, Finance, Operate and Transfer
(DBFOT) basis which inter-alia included construction of project
facilities such as toll plazas on the NHs.
5.2. It is his contention that in terms of the said Concession
Agreement, the appellant-2 were granted the right to appoint
sub-contractors for performance of its obligations. Pursuant to
the said Concession Agreement, the appellant-2 had entered into
an agreement with appellant-1, the sub-contractor, as per the
Toll Management System Agreements dated 13.01.2012 and
16.02.2012 for supply, installation, commissioning and
maintenance of TMS on the portion of the NHs required to be
operated by the appellant-2 under the Concession Agreements
with NHAI. In the sub-contractor agreements, it is clearly
stipulated that they were entering into such an agreement in
order to discharge its obligations under the Concession
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Agreements and therefore, the sub-contractor agreements
would be read in conjunction with the Concession Agreements
and all related agreements for the project. Pursuant to the said
agreements after appointing sub-contractor, the appellant-2 had
intimated NHAI through their various communications that they
had sub-contracted the supply, installation and maintenance of
TMS to appellant-1 and copies of the sub-contractor agreements
were also submitted to NHAI for their information. It is also
specifically informed that appellant-1 will be importing
equipments from outside India and list of such equipments was
also furnished. The appellant-2 had also informed NHAI that
appellant-1 would be availing the benefit of exemption under
NotificationNo.12/2012-Cus dated 17.03.2012. Consequently,
the NHAI has issued declaration dated 05.07.2012 certifying that
appellant-1 had been engaged as a contractor for the appellant-
2 for supply, installation, commissioning and maintenance of
TMS for the NHs and the supply of equipment, included imported
items. As appellant-1 was facing difficulties in getting clearance
of imported goods, appellant-2 through their letter dated
24.02.2012 intimated the Customs authorities at various airports
and air cargo complex that appellant-1 had been appointed as
sub-contractor in terms of the Concession Agreement and the
project needs to be completed within 150 days from the date of
award of the sub-contract agreement. Consequently, the sub-
contractor appellant-1 had imported various items against
several Bills of Entry during the period April 2012 to August 2012
by claiming exemption from BDC and CVD in terms of Sl.No.368
of Notification No.12/2012-Cus. dated 17.03.2012 after filing
necessary undertaking and bonds with the Customs Department
as per the said Notification. The imported goods were duly
installed at the respective sites in terms of the sub-contract
agreements as well as the Concession Agreement which is on
DBFOT basis; the title transfer of the imported goods from the
sub-contractor to the appellant-2 was a pre-requisite to meet
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the contractual obligation of operation and maintenance owed to
NHAI. Consequently, the imported goods were transferred from
the sub-contractor to the appellant-2.
5.3. The learned advocate has submitted that the sub-
contractor appellant-1 had correctly availed the benefit of the
exemption under Sl.No.368 of the Notification No.12/2012-Cus.
The sub-contractor has fulfilled the condition No.9 and most of
the clauses of the said condition 9 are not disputed by the
Department. The Revenue has disputed sub-clause (iii) of
Clause (a) of Condition 9 that the appellant-1 is not mentioned
as sub-contractor in the Concession Agreement; hence the said
condition is not fulfilled. In response to the said allegation, the
learned advocate has submitted that appellant-1 was appointed
as a sub-contractor by the appellant-2 with the approval and
knowledge of the NHAI to achieve the obligation prescribed
under the Concession Agreement between the appellant-2 and
NHAI. Reading the sub-contract agreements with the appellant-
2 and the Concession Agreements harmoniously, it could be
inferred that to achieve the intended objective of NH projects,
the sub-contractor has been appointed and since appellant-1 has
been genuinely appointed as sub-contractor being authorised in
terms of the Concession Agreements, a fact not disputed by the
NHAI; therefore, clause (a) of the Condition 9 is fulfilled.
5.4. Further, he has submitted that on a harmonious reading of
the sub-contract agreement along with the Concession
Agreement as well as the intimations filed by the appellant-2 to
NHAI and the declaration by the NHAI, it is amply clear that
appellant-1 was the sub-contractor of the appellant-2 who
participated in the construction of roads i.e. NHs. Further, he
has submitted that it is a settled principle of law that in case of
any latent ambiguities in a contract, subsequent evidence of the
intention of the parties is admissible for granting benefit. In
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support, they have referred to the commentary in the book viz.
'The Interpretation of Contracts, 5th ed." By Sir Kim Lewison.
Further, he has referred to the judgment of the Hon'ble Supreme
Court in the case of Food Corporation of India & Ors. Vs. Abhijit
Paul [(2023) 15 SCC 40] wherein the Hon'ble Supreme Court
held that extrinsic evidence in cases of latent ambiguity is
admissible to ascertain where necessary, the meanings of the
words used and to identify the objects to which they applied.
Further, he has referred to the judgment of the Hon'ble Delhi
High Court in the case of Commissioner of Income Tax Vs. Shiv
Raj Gupta [(2015) 372 ITR 337] wherein it is held that a
document executed shortly after the primary document has to
be construed as and be relied upon as an aid of construction as if
it forms part of the same transaction as the primary document to
ascertain the true intention of the parties. He has submitted
that refusing to read the above two agreement in conjunction
with the subsequent letters and declaration, the learned
Commissioner has given an absurd meaning to the terms of the
contracts between three consensual parties and effectively held
that appellant-1 was not a sub-contractor of the appellant-2.
Further, they have submitted that in the impugned order, the
decision in the case of Gammon India Ltd. vs. CC [2011(269)
ELT 289 (SC)] has been mis-quoted and mis-interpreted without
considering the distinguishable facts; therefore, not applicable to
the present circumstances.
5.5. Similarly in the impugned order, the adjudicating authority
has incorrectly placed reliance on the decision in the case of
CC(Import), Mumbai Vs. Dilip Kumar & Company [2018(361)
ELT 577 (SC)] without considering the scope of the subsequent
decision of the Supreme Court in the case of Government of
Kerala Vs. Mother Superior Adoration Convent [2021(376) ELT
242 (SC)]. He has submitted that a beneficial exemption should
adopt a literal interpretation and in case any ambiguity arises,
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pursuant to such interpretation, the benefit of such exemption
should be construed in favour of the object or activity exempted
under the said notification. Further, he has submitted that
appellant-1 had furnished necessary undertakings to the
Department at the time of import along with bonds in terms of
condition (b); hence, procedural requirements under Notification
No.12/2012-Cus. dated 17.03.2012 have been duly satisfied by
the sub-contractor and no violation thereof could be alleged.
Alternatively, if it is a procedural lapse, it cannot be the sole
basis for denying the substantive benefit of the exemption. In
support, they have referred to the following decisions:-
i. Formica India Division Vs. CCE [1995(77) ELT 511 (SC)]
ii. SL Polypack Private Limited Vs. Commissioner CGST &CX,
Howrah [2023(1) TMI 931 - CESTAT KOLKATA]
iii. Mangalore Chemicals and Fertilisers Ltd. Vs. Dy.
Commissioner [1991(55) ELT 437 (SC)]
5.6. Further, it is submitted that the bonds executed by the
sub-contractor at the time of import have been subsequently
cancelled by the Department, which itself sufficiently establishes
that the Customs Department was fully satisfied at the
compliance with the conditions under Notification No.12/2012-
Cus. dated 17.03.2012 in respect of the imported goods. He has
submitted that once the bond has been discharged by the
Customs authorities, automatically it is meant that no duty is to
be paid by the importer; hence, allegation of contravention of
condition of Notification No.12/2012-Cus. as deserves to be set
aside. In support, they referred to the judgment in the case of
Davangere Cotton Mills Ltd. Vs. CCE [1991(53) ELT 48 (Tri.)].
5.7. The learned advocate has also submitted that clause (c) of
Condition No.9 of the said Notification is satisfied in the present
case as the imported goods were used by the appellant-1 and
appellant-2 exclusively for the intended purpose by fulfilling the
obligations under the Concession Agreement i.e. TMS which was
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supplied and installed in the toll plazas on the NHs. TMS seized
by the Department during the investigation by the DRI were
actually installed in the NHs and thus it is an undisputed fact
that imported goods were not diverted to any other party or for
any other purpose.
5.8. He has further submitted that the actions of the
Department throughout the entire period of dispute were only in
pursuance of fulfilling their obligations to NHAI under the
Concession Agreement and to aid in infrastructure development
in India vis-à-vis the construction and maintenance of the NHs.
Thus, the allegation of aiding and abetting and suppressing the
facts relating to imports cannot be sustained against the
appellant-2. Consequently, direction for confiscation of the
equipments under Section 111(o) of the Customs Act and
imposition of penalty under Section 112 also cannot be
sustained. Besides, the conditions mentioned under Section
111(o) of the Customs Act are not fulfilled in the present case as
it is directed against the importer, who is responsible for fulfilling
their conditions subject to which the imported goods were
allowed and exemption from duty considering the fact that the
appellant-2 were not importers; charge of confiscation under the
Customs Act cannot be forced on them. In support, they
referred to the following judgments:-
i. Senior Superintendent of Railway Mail Service Vs. CC
[2025-TIOL-1474-CESTAT-KOL]
ii. Global Boards Ltd. Vs. CC(Export) Vs. Mumbai [2019(8)
TMI 336 - CESTAT Mumbai]
iii. Noel Agritech Ltd. Vs. CCE&C, Mangalore [2011(273) ELT
306 (Tri. Bang.)]
iv. P. Ripakumar and Company Vs. UOI [1991(54) ELT 67
(Bom.)]
5.9. Also, they have argued that no penalty is imposable under
any of the provisions of the Customs Act, 1962. They relief upon
the following judgements:-
i. Lewek Altair Shipping Pvt. Ltd. Vs. CC [2019(366) ELT 318
(Tri. Hyd.) - Affirmed in 2019(367) ELT A328 (SC).
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ii. CCE Vs. HMM Limited [1995(76) ELT 497 (SC)]
iii. CCE&C Vs. Nakoda Textile Industries Ltd. [2009(240) ELT
199 (Bom.)]
iv. Hindustan Steel Ltd. Vs. State of Orissa [1978(2) ELT 159
(SC)]
v. Sij Electronics Comp Tech Vs. CC [2001(129) ELT 528
(Tri.)]
6. Learned AR for the Revenue has reiterated the findings of
the learned Commissioner.
7. Heard both sides at length and perused the records.
8. The issues involved in the present appeals for
consideration are whether: (i) the benefit of Sl.No.368 of
exemption Notification No.12/2012-Cus. dated 17.03.2012 is
available to the goods imported for use in the National Highway
projects viz. "Toll Management System"(TMS) by appellant-1;
(ii) the equipments imported duty-free claiming benefit of
Notification No.12/2012-Cus. dated 17.03.2012 and used in the
TMS are liable for confiscation under Section 111(o) of Customs
Act, 1962 and (iii) penalties are imposable on the appellants.
9. Undisputed facts of the case are that the NHAI floated
tender for construction, operation and maintenance of portion of
two NHs viz. NH13 pertaining to Hongund-Hospet section and
Hyderabad-Vijayawada Section of NH9. Consequently, NHAI
after allotment of the work to appellant-2, entered into
agreements titled as "Concession Agreement" dated 09.10.2009
and 22.03.2010 for implementation of the said projects.
Pursuant to the said agreements, appellant-2 in turn executed
agreements with M/s. Indra Sistemas India Pvt. Ltd. (appellant-
1) on 13.01.2012 and 16.02.2012 to perform the work of supply,
installation, commissioning and maintenance of TMS for the
projects of NH13 (99kms) and NH9 (181 kms). The
appointment of the sub-contractor viz. appellant-1 has been duly
communicated to NHAI through various communications
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commencing from 06.04.2012 intimating that appellant-1 will be
importing the equipments by availing exemption from customs
duty as per Notification No.12/2012-Cus dated 17.03.2012. The
certificate was later issued by NHAI on 05.07.2012
acknowledging the fact that M/s. Indra Sistemas India Pvt. Ltd.
was engaged as a contractor by the appellant-2. Also, a letter
was addressed by appellant-2 to the Deputy Commissioner of
Customs on 24.02.2012 to extend the benefit of Notification
No.12/2012-Cus. dated 17.03.2012 to the appellant-1.
Consequently, appellant-1 filed Bills of Entry from time to time
for import of the said equipments claiming exemption benefit
under Sl.No.368 of Notification No.12/2012-Cus. The exemption
was extended by the Customs Department after execution of an
undertaking by the appellant-1 with the Deputy Commissioner of
Customs against each imports. Later, on being satisfaction, the
goods were allowed to be cleared by the Customs Department
extending the benefit of exemption under Notification
No.12/2012-Cus and the imported equipments were installed in
the TMS as per the undertaking furnished. After completion of
the project, TMSs were handed over to appellant-2 by appellant-
1 in November 2014 and December 2014. Consequently, on
approaching the Customs Department about completion of the
project, the bonds / undertakings executed were discharged by
the Department.
10. The Revenue's allegation is that the appellant-1 has not
complied with the pre-import condition prescribed against
Sl.No.368 of Notification No.12/2012-Cus i.e. condition
No.9(a)(iii) and post-importation Condition No.9(b) inasmuch as
the appellant-1 has not been named as the sub-contractor in the
contracts executed between NHAI and appellant-2 and also, the
imported equipments which were undisputedly used only in the
TMS, but were disposed / sold within a period of 5 years from
the date of its import. The appellants on the other hand claimed
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that the 'Concession Agreements' entered between NHAI and
appellant-2 should be read in conjunction with the agreement
between appellant-1 and appellant-2; also all communications
exchanged from time to time between the appellant-2 with NHAI
and the Customs Department; on cumulative reading these
documents, it cannot be said that the appellant-1 has not been
appointed / named as sub-contractor in the said 'Concession
Agreements' or in pursuance to the said Agreements.
11. To analyse the rival contentions, it is relevant to
understand Sl.No.368 and the appended conditions of
Notification No.12/2012-Cus. dated 17.03.2012, which read as
follows:-
Sl.No.368
Sl.No. Chapter or Description of Standard Additional Condi
Heading or goods rate duty rate tion
Sub- No.
heading or
tariff item
(1) (2) (3) (4) (5) (6)
368 84 or any Goods specified Nil - 9
other in List 16
Chapter required for
construction of
roads
Condition No.9
Sl.No. Chapter or Description of Standard Additional Condi
Heading or goods rate duty rate tion
Sub- No.
heading or
tariff item
(1) (2) (3) (4) (5) (6)
9. If.- (a)the goods are imported by-
(i) the Ministry of Surface Transport, or
(ii) a person who has been awarded a contract for the construction
of roads in India by or on behalf of the Ministry of Surface
Transport, by the National Highway Authority of India, by the
Public Works Department of a State Government. Metropolitan
Development Authority or by a road construction corporation under
the control of the Government of a State or Union Territory, or
(iii) a person who has been named as a sub-contractor in the
contract referred to in (ii) above for the construction of roads in
India by or on behalf of the Ministry of Surface Transport, by the
National Highway Authority of India, by Public Works Department
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of a State Government, Metropolitan Development Authority or by
a road construction corporation under the control of the
Government of a State or Union Territory;
(b) the importer, at the time of importation, furnishes an
undertaking to the Deputy Commissioner of Customs or the
Assistant Commissioner of Customs, as the case may be, to the
effect that he shall use the imported goods exclusively for the
construction of roads and that he shall not sell or otherwise dispose
of the said goods, in any manner, for a period of five years from
The date of their importation:
Provided that the said Deputy Commissioner of Customs or the
Assistant Commissioner of Customs, may allow the importer to sell
or dispose of any of the imported goods on payment of customs
duties at the rates applicable at the time of import but for this
exemption, on the depreciated value of the goods to be calculated
@ 5% on straight line method for each completed quarter starting
from the date of importation of the said goods till the date of their
sale subject to the condition that the concerned Ministry, Authority,
Department or Corporation referred to in condition (a) above
certifies that said goods in the project, for which duty free import
was allowed, are no longer required for the project.
12. On a plain reading of the said Notification, particularly
Condition No.9(a), it is clear that a person who has been named
as a sub-contractor in the contract referred to in sub-clause(ii)
would be eligible for availing exemption for import of goods for
use in the construction of roads as mentioned in Sl.No.368 and
would be eligible for the said benefit. To understand whether
the appellant-1 be considered as a sub-contractor, it is
necessary to read certain clauses of Concession Agreements
between NHAI and appellant-2 and the subsequent agreements
between appellant-1 and appellant-2. The relevant clauses of the
'Concession Agreement' dated 22.03.2010 need to be quoted,
which are as below:-
CONCESSION AGREEMENT
THIS AGREEMENT is entered into on this the 22nd day of March,
2010.
BETWEEN
1 THE NATIONAL HIGHWAYS AUTHORITY OF INDIA,
established under the National Highways Authority of India Act
1988, represented by its Chairman and having its principal offices
at G-5 & 6, Sector 10, Dwarka, New Delhi-110075 (hereinafter
referred to as the "Authority" which expression shall, unless
repugnant to the context or meaning thereof, include its
administrators, successors and assigns) of One Part;
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AND
2 M/s GMR OSE HUNGUND HOSPET HIGHWAYS PRIVATE
LIMITED, a company incorporated under the provisions of the
Companies Act, 1956 and having its registered office at 25/1,
Skip House, Museum Road, Bangalore - 560025, Karnataka
(hereinafter referred to as the "Concessionaire" which
expression shall, unless repugnant to the context or meaning
thereof, include its successors and permitted assigns and
substitutes) of the Other Part.
WHEREAS:
(A) The Government of India had entrusted to the Authority
the development, maintenance and management of
National Highway No. 13 including the section from km
202.000 to km 299.000 (approx. 99.054 kms).
(B) The Authority had resolved to augment the existing road
from km 202.000 tο km 299.000 (approximately 99.054
km) on the Hungund-Hospet section of National Highway
No.13 (hereinafter called the "NH -13") in the state of
Karnataka by Four-Laning from existing km 202.000
(Design Km 199.221) to existing Km 288.133 (Design Km
285.100) & from Km 298.565 (Design 296.689) to
existing Km 299.000 (Design Km 297.115)
(approximately 86.305 Kms) and Six-Laning from Design
Km 283.940 to Km 296.689 (approx. 12.749 Km) on
design, build, finance, operate and transfer ("DBFOT")
basis in accordance with the terms and conditions to be
set forth in a concession agreement to be entered into.
(C) The Authority had accordingly invited proposals by its
Notice/ Request for Qualification No. NHDP
III/BOT/KNT/06 dated 28th February 2009 (the "Request
for Qualification" or "RFQ") for short listing of bidders
for construction, operation and maintenance of the above
referred section of NH -13 on DBFOT basis and had
shortlisted certain bidders including, inter alia, the
consortium comprising M/s.GMR Infrastructure Limited,
having Registered Office at 25/1, Skip House, Museum
Road, Bangalore-560025 and M/s. Oriental Structural
Engineers Pvt Ltd, having Registered Office at 21,
Commercial Complex, Malcha Marg, Diplomatic Enclave.
New Delhi -110021 (collectively the "Consortium") with
M/s.GMR Infrastructure Limited as its lead member (the
"Lead Member").
(D) The Authority had prescribed the technical and
commercial terms and conditions, and invited bids (the
"Request for Proposals" or "RFP") from the bidders
shortlisted pursuant to the RFQ for undertaking the
Project.
(E) After evaluation of the bids received, the Authority had
accepted the bid of the Consortium and issued its Letter of
Award No. NHAI/BOT/11012/PPPAC/KNT/05/2008/19
dated 8th February, 2010 (hereinafter called the "LOA")
to the Consortium requiring, inter alia, the execution of
this Concession Agreement within 30 (thirty) days of the
date of issue thereof.
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(F) Consortium has since promoted and incorporated the
Concessionaire as a limited liability company under the
Companies Act 1956, and has requested the Authority to
accept the Concessionaire as the entity which shall
undertake and perform the obligations and exercise the
rights of the Consortium under the LOA, including the
obligation to enter into this Concession Agreement
pursuant to the LOA for executing the Project.
(G) By its letter dated 9th March 2010 the Concessionaire has
also joined in the said request of the Consortium to the
Authority to accept it as the entity which shall undertake
and perform the obligations and exercise the rights of the
Consortium including the obligation to enter into this
Concession Agreement pursuant to the LOA. The
Concessionaire has further represented to the effect that
it has been promoted by the Consortium for the purposes
hereof.
(H) The Authority has agreed to the said request of the
Consortium and the Concessionaire and has accordingly
agreed to enter into this Concession Agreement with the
Concessionaire for execution of the Project on DBFOT
basis subject to and on the terms and conditions set forth
hereinafter.
NOW THEREFORE, in consideration of the foregoing and the
respective covenants and agreements set forth in this
Concession Agreement, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE 2
SCOPE OF THE PROJECT
2.1 Scope of the Project
The scope of the Project (the "Scope of the Project")
shall mean and include, during the Concession Period:
(a) construction of the Project Highway on the Site set forth
in Schedule-A and as specified in Schedule-B together
with provision of Project Facilities as specified in
Schedule-C, and in conformity with the Specifications and
Standards set forth in Schedule-D;
(b) operation and maintenance of the Project Highway in
accordance with the provisions of this Agreement; and
(c) performance and fulfilment of all other obligations of the
Concessionaire in accordance with the provisions of this
Agreement and matters incidental thereto or necessary for
the performance of any or all of the obligations of the
Concessionaire under this Agreement.
(h) support cooperate with and facilitate the Authority in the
implementation and operation of the Project in accordance
with the provisions of this Agreement: and
(i) transfer the Project Highway to the Authority upon
Termination of this Agreement, in accordance with the
provisions thereof.
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5.2 Obligations relating to Project Agreements
5.2.1 It is expressly agreed that the Concessionaire shall, at all
times, be responsible and liable for all its obligations
under this Agreement notwithstanding anything contained
in the Project Agreements or any other agreement, and no
default under any Project Agreement or agreement shall
excuse the Concessionaire from its obligations or liability
hereunder.
5.2.2 The Concessionaire shall submit to the Authority the drafts
of all Project Agreements, or any amendments or
replacements thereto, for its review and comments, and
the Authority shall have the right but not the obligation to
undertake such review and provide its comments, if any,
to the Concessionaire within 15 (fifteen) days of the
receipt of such drafts. Within 7 (seven) days of execution
of any Project Agreement or amendment thereto, the
Concessionaire shall submit to the Authority a true copy
thereof, duly attested by a Director of the
Concessionnaire, for its record. For the avoidance of
doubt, it is agreed that the review and comments
hereunder shall be limited to ensuring compliance with the
terms of this Agreement. It is further agreed that no
review and/or observation of the Authority and/or its
failure to review and/or convey its observations on any
document shall relieve the Concessionaire of its
obligations and liabilities under this Agreement in any
manner nor shall the Authority be liable for the same in
any manner whatsoever
5.2.3 The Concessionaire shall not make any addition,
replacement or amendments to any of the Financing
Agreements without the prior written consent of the
Authority if such addition, replacement or amendment
has, or may have, the effect of imposing or increasing any
financial liability or obligation on the Authority, and in the
event that any replacement or amendment is made
without such consent, the Concessionaire shall not enforce
such replacement or amendment nor permit enforcement
thereof against the Authority. For the avoidance of doubt,
the Authority acknowledges and agrees that it shall not
unreasonably withhold its consent for restructuring or
rescheduling of the debt of the Concessionaire.
5.2.4 The Concessionaire shall procure that each of the Project
Agreements contains provisions that entitle the Authority
to step into such agreement, in its sole discretion, in
substitution of the Concessionaire in the event of
Termination or Suspension (the "Covenant"). For the
avoidance of doubt, it is expressly agreed that in the
event the Authority does not exercise such rights of
substitution within a period not exceeding 90 (ninety)
days from the Transfer Date, the Project Agreements shall
be deemed to cease to be in force and effect on the
Transfer Date without any liability whatsoever on the
Authority and the Covenant shall expressly provide for
such eventuality. The
43.4 Restriction on sub-letting
The Concessionaire shall not sublicense or sublet the
whole or any part of the Site, save and except as may be
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expressly set forth in this Agreement; provided that
nothing contained herein shall be construed or interpreted
as restricting the right of the Concessionaire to appoint
Contractors for the performance of its obligations
hereunder including for operation and maintenance of all
or any part of the Project Highway.
"Contractor" means the person or persons, as the case
may be, with whom the Concessionaire has entered into
any of the EPC Contract, the O&M Contract, the Tolling
Contract or any other agreement or a material contract for
construction, operation and/or maintenance of the Project
Highway or matters incidental thereto, but does not
include a person who has entered into an agreement for
providing financial assistance to the Concessionaire;
Also, relevant clauses of 'Toll Management System
Agreement' dated 16.02.2012 between appellant-2 and
appellant-1 are reproduced below:-
AGREEMENT
THIS MEMORANDUM OF AGREEMENT (hereinafter
called the "Agreement") made and entered into this day
of 16th February, 2012 at Bangalore.
BETWEEN
GMR OSE Hungund Hospet Highways Private
Limited a company incorporated under the provisions
of the Companies Act, 1956, having its Registered Office
at 25/1, SKIP House, Museum Road, Bangalore -
560025 and Corporate office at - IBC Knowledge Park,
Phase 2, D Block, 10th Floor, 4/1, Bannerghatta Road,
Bangalore 560029 hereinafter called the
"Concessionaire" or "Purchaser" or "GOHHHPL",
(which expression shall include its successors,
representatives and permitted assigns) of the FIRST
PART.
AND
Indra Sistemas India Private Limited, a company
incorporated in India with its office at 5th Floor, Wing-
B, IFCI Tower, 61, Nehru Place, New Delhi 110019 India
(hereinafter called "Indra", or "TMS Provider" or
"Contractor" or "Successful Bidder" or "Bidder", which
expression shall, unless repugnant to context or
meaning thereof, include its successors in title and
permitted assignees) of the Other Part.
WHEREAS
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A. The Government of India had entrusted to the
NHAI the development, maintenance and
management of National Highway No.13 including
Section from km 202.000 to km 299.000 (approx.
99.054 kms).
B. NHAI had resolved to augment the existing road
from lm 202.000 to km 299.000 (approximately
99.054 km) on the Hungund-Hospet section of
National Highway No.13 (hereinafter called the
"NH-13") in the state of Karnataka by Four-Laning
from existing km 202.000 (Design Km 199.221) to
existing Km 288.133 (Design Km 285.100) & from
Km 298.565 (Design 296.689) to existing Km
299.000 (Design Km 297.115) (approximately
86.305 Kms) and Six-Laning from Design Km
283.940 to Km 296.689 (approx. 12.749 Km) on
design, build, finance, operate and transfer
("DBFOT") basis (hereinafter referred as "Project")
C. By an agreement dated 22 March, 2010 [the
"Concession Agreement (CA)"), NHAI has
awarded to the Concessionaire a concession for
undertaking, inter alia, the Design, Engineering,
Financing, Procurement, Construction, Operation
and Maintenance of the Project Highway on
DAPOT basis;
D. As per the provisions of the Concession
Agreement Concessionaire has to procure, install,
commission and maintain a Toll Management
System in the Project;
E. The Concessionaire intends to appoint a
technically competent and financially sound TMS
Service Provider firm as Contractor to provide and
perform the work of "Supply. Installation,
Commissioning and Maintenance of Toll
Management System"(hereinafter collectively
called the "Works").
F. The Contractor, having represented to the
Concessionaire through a competitive Bidding
Process that they have the required Equipment,
professional skills, personnel resources and
technical competency to carry out the Works and
have agreed to execute the Works on the Terms
and Conditions set forth in this Agreement;
G. The Contractor recognizes and acknowledges that
the Concessionaire is entering into this Agreement
in order to discharge its obligations under the
Concession Agreement and, therefore, this
Agreement shall be read in conjunction with the
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Concession Agreement and all related Agreements
for the Project.
H. Relying on the Contractor's representations and
assertions with respect to its ability and expertise
to provide and perform the Services, the
Concessionaire has decided to procure the Works
on the terms and conditions as set forth in this
Agreement and the attachments thereto, all of
which shall be treated as incorporated herein
NOW THEREFORE in consideration of the
foregoing and the respective covenants and
agreements set forth in this Agreement, the
sufficiency and adequacy of which is hereby
acknowledged, and intending to be legally bound
hereby, the Parties agree as follow:
1.0. The Concessionaire hereby appoints the Contractor
to "Supply, Install, Commission and Maintain the
Toll Management System in the Project as detailed
out in this Agreement and the Contractor hereby
accepts the appointment to provide and perform
the said Works for the Project in accordance with
this Agreement and Other related documents.
This Agreement shall be in effect from 8th
December, 2011.
1.1. The mutual rights and obligations of the
Concessionaire and the Contractor shall be as set
forth in this Agreement;
The letter addressed by appellant-2 to the Project Director,
NHAI dated 05.04.2012 reads as follows:-
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13. Reading the aforesaid quoted cluses of the agreements, it
is clear that under the Concession Agreement, the contractor is
at liberty to appoint sub-contractors for implementation of the
project work which accordingly in the present case, implemented
by the appellant-2 by entering into an agreement separately
with appellant-1 for TMS. Further reading the letter dt.
05.4.2012 addressed to the NHAI it reveals that it was within the
knowledge of NHAI that a sub-contractor has been appointed by
appellant-2, who was initially awarded the work for the said road
construction projects. Also, for effecting the import of the
necessary equipments, to avail the benefit of Notification
No.12/2012-Cus, NHAI has issued a certificate on 05.07.2012 to
facilitate import of the equipments by the sub-contractor. Also,
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appellant addressed letters to Customs Department intimating
that the equipments that were to be used in the TMS be allowed
to be imported by availing concession by the importer M/s. Indra
Sistemas India Private Limited, appellant-1. Therefore, it is
incorrect on the part of the adjudicating authority who arrived at
the conclusion that since the appellant-1, M/s. Indra Sistemas
India Private Limited's name was not specifically appearing in
the Concession Agreement, even though there has been an
agreement pursuant to the Concession Agreement entered
between the NHAI and contractor appellant-2, who is authorised
to enter into such contracts with appellant-1, the condition
No.9(a) of the said Notification has not been fulfilled. On the
contrary, we find that the appellant-1 has sufficiently complied
with the Condition No.9(a) of the said Notification. This is in line
with the Circular dated 16.05.2013 issued by the Board in
relation to exemptions relating to oil exploration sector, wherein
it is clarified that non-mention of the name of the sub-contractor
in the agreement signed between the contractor and Govt. of
India cannot be a ground for denying the benefit of the
exemption notification and the benefit of exemption should be
allowed based on the Essentiality Certificate issued. The
relevant clause 2.4 of the said Circular dated 16.05.2013 is
reproduced below:-
Circular No. 21/2013-Customs
F.No.B1/20/2013 -TRU
Government of India
Ministry of Finance
(Department of Revenue)
Tax Research Unit
*****
New Delhi, dated 16th May, 2013 To, All Chief Commissioners of Customs.
All Chief Commissioners of Customs & Central Excise. All Chief Commissioners of Central Excise.
Subject: Difficulties being faced in availing exemption relating to the Oil Exploration Sector- Regarding.
Page 23 of 28C/20834, 20835, 20882/2019 Sir / Madam.
Representations have been received from the trade and the field formations regarding difficulties being faced in availing / extending exemption relating to the Oil Exploration Sector under Sl.No.356, 358 and 359 of notification No.12/2012-Customs, dated 17-03-2012.
2. ... ....
2.1 ....
2.2. ...
2.3. ...
2.4. Whether each sub-contractor (of a contractor) is required to enter into a contract with the GOI or his name should figure in the contract agreement signed between the contractor and GOI for availing the benefit of this exemption.
2.4.1 Field formations are not allowing the benefit of exemption to imports made by the sub-contractor if his name does not figure in the contract signed between the GOI and the Contractor on the ground that as per the condition of the exemption, the importer is required to produce a certificate from DG, Hydrocarbons, that the imported goods have been imported under a contract signed under the New Exploration Licensing Policy, and containing the name of such sub-contractor.
2.4.2 The condition (c) (i) in all the Sl. Nos. of the said notification requires that the importer should produce an EC, which should indicate that the goods have been imported under a contract entered between the Government and the contractor, and it should also contain the name of the sub-contractor. The requirement of containing "the name of the sub- contractor" is in the EC issued by the DG Hydrocarbons and not in the original contract entered into by the contractor with the GOI. If the sub-contractor is required to enter into a contract with the GOI, then the condition viz an affidavit to the effect that such sub- contractor is a bona-fide sub-contractor of the contractor would be superfluous. Moreover, at the time of entering into contract, the contractor normally does not know the name of his sub-contractor. Hence, it is not possible to include his name in the original contract.
2.4.3 It is, therefore, clarified that non-mention of the name of sub-contractor in the agreement signed between the contractor and GOI cannot be a ground for denying the benefit of the exemption and that the exemption should be allowed based on the EC issued by the DG, Hydrocarbons.
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14. More or less in identical facts and circumstances, this Tribunal in the case of ITS Solutions India Pvt. Ltd. Vs. CC, Chennai [2011(263) ELT 318 (Tri. Chennai)], holding similar view observed as follows:-
2. The appellants have been denied the exemption under Notification No. 21/2002, Sl. No. 230 as it has been held that they have not fulfilled Condition No. 40 specified against the said serial number. The impugned notification grants exemption to goods required for construction of roads. It has been held by the authorities below that the appellants are not mentioned as a sub-contractor in the contract between the Govt., of Tamilnadu and the Tamil Nadu Road Development Corporation (TNRDC) and hence they do not satisfy clause (a)(iii) of Condition No. 40. However, the learned counsel Shri Alwar appearing for the appellants shows a purchase order dated 10-10-2002 issued by the TNRDC to the appellants for high speed barrier for ECR toll plazas. He also takes us through a letter dated 7-1-2003 issued by the Govt. of Tamil Nadu to the Customs authorities clarifying that the appellants are a sub-
contractor of the TNRDC. As such, we find that the purchase order issued by the TNRDC to the appellants under which the impugned road construction work has been done is very much a contract and the appellants are the contractors. Clause (a)(ii) to Condition 40 in the impugned notification also allows duty exemption to goods imported by a person who has been awarded a contract by road construction corporation under the control of the Govt. of a State. In our view, the appellants are covered under the said Clause (a)(ii) of Condition 40 having been given a contract for road building under the afore cited purchase order issued by TNRDC. Moreover, the letter issued by the Govt. of Tamil Nadu cited above clearly establishes the bona fides of the appellants who have undertaken the road construction work on behalf of TNRDC. Hence, we are of the view that the benefit of exemption under the impugned notification cannot be denied to the appellants. Accordingly, we set aside the impugned order and allow the appeal with consequential benefits to the appellants.
The said judgment was later followed by the Bombay Bench of this Tribunal in the case of Ideal Road Builders Pvt. Ltd. Vs. CC, Mumbai [201(12) TMI 1314 - CESTAT MUMBAI].
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15. As far as compliance of clause (b) of the Condition No.9 of the said Notification is concerned, we find that after completion of the project by installation of TMS on the respective National Highways 9 & 13, the same were transferred by the appellant-1 to appellant-2 as condition of the contract between them. To read the said clause (b) of the Condition No.9 of the Notification No.12/2012-Cus. as alleged by the Revenue, that the contractor shall not sell or otherwise dispose of the goods, in any manner, for a period of 5(five) years from the date of their importation, without the permission of the Department, in our view, is misreading of the said expression. Once the project has been completed, it is not necessary for the contractor or sub- contractor to wait to hand over the project for the remaining period; also, it is wrong to construe that it cannot transfer the project to NHAI or the contractors by the sub-contractor as the case may be, even after completion of the said projects. Therefore, the Commissioner's finding that the appellant-1 has not complied with the said Condition No.9(b) also cannot be sustained. We find that in interpreting Explanation 2 of Notification No.108/95-CE dated 28.08.1995 involving more or less relating to withdrawal of the goods on completion of the projects, this Tribunal following the principle laid down by the Hon'ble Madras High Court and also later affirmed by the Hon'ble Supreme Court, observed in the case of Schwing Shetter (I) Pvt. Ltd. Vs. CCE&ST, LTU, Chennai [2018(34) ELT (Tri. Chennai) as follows:-
8. In the Bird Machines case, the main issue was whether the exemption is available when the goods are supplied to the Contractors. The Hon'ble Apex Court vide judgment reported in 2016 (335) E.L.T. A27 (S.C.) subsequently has affirmed the decision of the jurisdictional High Court in Caterpillar India (P) Ltd.
(supra). Therefore, the decision given in Bird Machines being prior to the judgment of Hon'ble Apex Court is no longer a good law and cannot be relied upon. The jurisdictional High Court in the case of CCE, Page 26 of 28 C/20834, 20835, 20882/2019 Pondicherry v. CESTAT, Chennai - 2016 (335) E.L.T. 211 (Mad.) has considered the eligibility of exemption Notification No. 108/95 and followed the decision in the case of Caterpillar India (P) Ltd. (supra). It is pertinent to mention that the Hon'ble High Court in the said judgment had disagreed with the judgment laid in the case of Bird Machines (supra). We find that in para-39 of the judgment in the case of Bird Machines, the Tribunal made an observation that benefit is available only when the goods are supplied to the project for the use at the project site. The Ld. AR has laid much thrust on the last two sentences in this para. In our view this is only a passing observation and does not lay down the ratio of the case. In other words, the issue agitated in the said case was not whether the exemption under the notification would be available if the goods are withdrawn after the completion of the project. Being only obiter dicta the same does not have precedential value. This apart, to compel the contractor that the capital goods used in the project cannot be withdrawn even after completion of the project would be highly impractical and impossible. The law does not compel a man to do that which he cannot possibly perform. 'Lex. non cogit ad impossibilia'. The decisions in the case of Caterpillar India Pvt. Ltd, (supra), IBM India Pvt. Ltd., held that the goods supplied to Contractors were available for exemption. The goods involved in these cases are not goods such as cement or steel which form part of the project permanently. The Higher Courts have held that exemption is available even if such goods are supplied to Contractor and that supply to Contractor would mean supply to Project Authority as stated in the Notification. The department cannot then interpret the Explanation inserted in the Notification to restrict the exemption only to goods which form part of project on permanent basis. The appellant has complied with the condition of furnishing certificate of designated authorities. The department allowed clearance of the goods without any murmur on the validity of the certificate. The department cannot later turn around to deny exemption by interpreting Explanation 2 to the effect that the exemption is not available if the goods are withdrawn from project site. The Contractor would not be able to retain the capital goods in the project site after completion of the project and the interpretation of Explanation 2 by the Department in this angle does not find favour with us.
16. In the result, it can be safely inferred that the appellant-1 are eligible to the benefit of Sl.No.368 of the exemption Notification No.12/2012-Cus. dated 17.03.2012 as they complied Page 27 of 28 C/20834, 20835, 20882/2019 with all the conditions of the said Notification. Since the appellants are eligible to the benefit of the said Notification, the other issues like confiscation of goods seized and imposition of penalties deserve to be set aside; accordingly, set aside. Consequently, the impugned order is set aside and the appeals are allowed with consequential relief, if any, as per law.
(Order pronounced in Open Court on 24.03.2026) (D.M. MISRA) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) Raja...
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