Custom, Excise & Service Tax Tribunal
Punj Lloyd Ltd vs Commissioner Of Customs (I), Mumbai on 10 March, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. C/591/06-Mum (Arising out of Order-in-Original No. 18/2006/CAC/CC(I)/AKP dated 31.1.2006 passed by Commissioner of Central Excise & Customs (Appeals), Mumbai) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. C.J. Mathew, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Punj Lloyd Ltd. Appellant Vs. Commissioner of Customs (I), Mumbai Respondent Appearance: Shri J.H. Motwani with Ms. Nehal Parekh, Advocates, for appellant Shri A.B. Kulgod, Assistant Commissioner (AR), for respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 20.2.2017 Date of Decision: 10.3.2017 ORDER NO Per: M.V. Ravindran
This appeal is directed against order-in-original No. 18/2006/CAC/CC(I)/AKP dated 31.1.2006.
2. When the matter was called out, appellants counsel sought a pass-over, but the request was rejected as this matter has been coming up for disposal regularly and after hearing the learned departmental representative, the learned counsel was given liberty to file written submissions which they have done so. The said written submissions are considered.
3. The relevant facts that arise for consideration, after filtering out unnecessary details, are the appellant herein entered into a bid for Mumbai-Manmad pipeline project which was being laid by Bharat Petroleum Corporation Ltd. (BPCL) for transportation of petroleum goods; was awarded a contract vide letter of acceptance dated 23.12.1996 for laying of the pipeline for which pipes were supplied by BPCL as free issue items. The said project of laying pipeline was notified by the Central Government under Chapter Heading 98.01 of the Customs Tariff Act and by Notification 160/95-Cus. On recommendation of BPCL, Ministry of Petroleum and Natural Gas issued Essentiality Certificate dated 6.3.1997 along with list of items to appellant for import for the said project. On the basis of such essentiality certificate, appellant sought registration of their contract for import of goods for supply to BPCL at concessional rate of duty, which was registered by the department. Subsequently, appellant imported various items and filed bills of entry dated 28.3.1997, 4.4.1997, 19.5.1997, 13.6.1997 and 15.9.1997 for import of field joint coating material, welding electrodes, magnetic ribbon and welding material. The lower authorities issued show cause notice to appellant asking to show cause as to why the provisional registration of the contract should not be finalized by assessing the goods imported vide the above bills of entry, as consumables on merits and not as capital goods. Appellant contested the issue on merits before the lower authorities. The adjudicating authority, after following due process of law, confirmed the demand of differential duty and also imposed penalties and confiscated the goods holding them as liable for confiscation with an option to redeem the same on payment of redemption fine.
4. It is the case of the appellant that the benefit of Notification 160/95 is applicable directly to all projects entered for Mumbai-Manmad pipeline project and the items which are imported by the appellant were in respect of the said project only and should have been assessed at the rate of project import and not as independent consumables.
5. Learned departmental representative reiterates the findings of the lower authorities and submits that the items which are imported are not capital goods and only capital goods are permitted to be imported under project imports. The items being consumables, could not have been imported under project imports.
6. On careful consideration of the submissions made, the issue that falls for consideration is whether the items i.e. field joint coating material, welding electrodes, magnetic ribbon and welding material are eligible for concessional rate of duty as per Notification 11/97-Cus. under serial No.226 or otherwise.
7. Undisputedly, the items in dispute are indicated in the Essentiality Certificate issued by the Ministry of Petroleum and Natural Gases and were imported for use/consumption in the Mumbai-Manmad pipeline project which has been specified by the Central Government of India under project imports as per Notification 160/95-Cus. The findings of the adjudicating authority in not extending the concessional rate of duty to the appellant on these materials is only on the ground that the items are consumables and the imports are made by two separate importers i.e. BPCL as well as the appellant herein.
8. First and foremost, the adjudicating authority has lost sight of the fact that the Central Government of India has issued Notification No.160/95 for Mumbai-Manmad pipeline project to be considered for project imports. For the said project, BPCL was the implementing authority who awarded the contract to the appellant following requisite procedures. BPCL themselves imported pipes for such project and handed over the same to appellant for laying the same in designated area; appellant imported other materials required for laying the said pipeline project. It is the finding of the adjudicating authority that every project is an independent standalone project contract which must satisfy all conditions of Heading 98.01 and in the case in hand, having not satisfied so, the differential duty needs to be confirmed on the appellant which, in our considered view, is totally wrong, as if the project is registered by the department in the name of BPCL as well as in the name of the appellant, today it cannot be said that the appellant is ineligible to avail the benefit of the said project import. It is also noticed that the Ministry of Petroleum and Natural Gases, on an application made by the appellant with specific reference to the said project, gave an Essentiality Certificate which is annexed at page 19 of the appeal memoranda. We perused the said Essentiality Certificate. It specifically recommended the appellants name for availing the benefit of project imports for the concessional customs duty as per the notification and the items to be imported were also annexed to the said permission wherein the imported items which are in dispute in this appeal are indicated. On the face of such Essentiality Certificate which has been given by the Government of India, Ministry of Petroleum and Natural Gases, the adjudicating authority coming to the conclusion that the project imports facility cannot be extended to the appellant is totally incorrect finding and also not in consonance with the law as has been laid down by the Honble Supreme Court in the case of Zuari Industries Ltd. vs. CCE 2007 (210) ELT 648 (SC). In the case of Zuari Industries Ltd. (supra), Their Lordships were considering identical issue of benefit of exemption of project import under Notification 11/97 (serial No.226); the very same notification is in dispute in this case and Their Lordships in paragraphs 9 and 10 held as under:-
9. Firstly, on the facts we find that the assessee had given to the sponsoring Ministry its entire Project Report. In that report they had indicated that for the expansion of the fertilizer project they needed an extra item of capital goods, namely, 6MW Captive Power Plant. In their application, the assessee had made it clear that the fertilizer project was dependant on continuous flow of electricity, which could be provided by such Captive Power Plant. Therefore, it was not open to the Revenue to reject the assessee's case for nil rate of duty on the said item, particularly when the certificate says so. In the judgment of this Court in the case of Tullow India Operations Ltd. (supra), this Court held that essentiality certificate must be treated as a proof of fulfilment of the eligibility conditions by the importer for obtaining the benefit of the exemption notification. We may add that, the essentiality certificate is also a proof that an item like Captive Power Plant in a given case could be treated as a capital goods for the fertilizer project. It would depend upon the facts of each case. If a project is to be installed in an area where there is shortage of electricity supply and if the project needs continuous flow of electricity and if that project is approved by the sponsoring Ministry saying that such supply is needed then the Revenue cannot go behind such certificate and deny the benefit of exemption from payment of duty or deny nil rate of duty. To the said effect is the judgment of the Calcutta High Court in the case of Asiatic Oxygen Ltd. (supra) in which it was held that the object behind the specific Heading 98.01 in Customs Tariff Act, 1975 was to promote industrialization and, therefore, the heading was required to be interpreted liberally. It was further held that, once an essentiality certificate was issued by the sponsoring authority, it was mandatory for the Revenue to register the contract.
10. Secondly, before us, it has been vehemently urged that although the essentiality certificate stood issued by the sponsoring Ministry, there is non-application of mind by that Ministry with regard to the list of items appended to the certificate. According to the Department, the said list has not been countersigned by the competent authority in the sponsoring Ministry. We do not find any merit in the said contention. The list consists of 14 items. The Department has accepted 13 out of 14 items as capital goods required for the fertilizer project, therefore, it cannot be said that the sponsoring Ministry had not applied its mind to the list appended to the essentiality certificate. This point needs further clarification. The power plant in the conceptual sense or in the technical sense is certainly different from the fertilizer plant. However, when we come to Heading 98.01 of the Customs Tariff Act, 1975, the assessment is for the Project. As stated above, Heading 98.01 is the specific entry applicable in the case of the Project Imports. An item like a power plant could be in a given case an independent Plant. Generally, it is a stand-alone equipment. However, when it becomes a part of the entire Project/System, the same power plant can also become one of the items of capital goods. The essentiality certificate given by the sponsoring Ministry has treated Captive Power Plant, in this case, as "capital goods" along with 13 other items. The assessee has also treated the Captive Power Plant as one of the capital goods required for the expansion of the fertilizer project. In the above circumstances, all the items in the list annexed to the certificate have been certified and recommended by the sponsoring Ministry as the entire capital goods required for the substantial expansion of the fertilizer project. Therefore, in our view, the assessee is right in its contention that, in this case, 6 MW Captive Power Plant is one of the items out of 14 items constituting capital goods required for the substantial expansion of the fertilizer project, and, therefore, it fell under serial no. 226(i) as goods required for the fertilizer project entitled to the benefit of nil rate of duty.
9. Similar is the view expressed by Their Lordships in the case of CC vs. Tullow India Operations Ltd. 2005 (189) ELT 401 (SC), wherein Their Lordships have categorically laid down the law that once an Essentiality Certificate is produced, it should be treated as proof of fact that importers have fulfilled the conditions enabling them to obtain the benefit under exemption notification. Their Lordships were considering the similar issue but in respect of the certificate issued by Director General of Hydrocarbons. In paragraphs 35 and 36, their Lordships held as under:-
35. The essentiality certificate, thus, must be treated to be a proof of the fact that the importers have fulfilled the conditions enabling them to obtain the benefit under the exemption notification.
36. The principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning.
10. The law laid down by the apex court in both the decisions as cited herein above would cover the issue in hand squarely, inasmuch that the sponsoring Ministry i.e. Ministry of Petroleum and Natural Gases has issued an Essentiality Certificate to the appellant along with the list of items that could be imported by the appellant, which included the items which are imported and the benefit of concessional rate of duty under project import was sought.
11. In view of the facts and circumstances of this case and the authoritative judicial pronouncements on the similar/identical issue, we hold that the impugned order is unsustainable and liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed, directing the lower authorities to finalise the assessment as per the Project Import Regulations.
(Pronounced in Court on 10.3.2017) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) tvu 1 10 C/591/06