2023 (2) TMI 242 - AT - Customs

Exemption from the whole of the duty of customs - Import of Machinery as Gift - bilateral Agreement - imported plant and machinery from the European Union for setting up a Fruit Processing Plant at Muvattupuzha in Kerala - exemption notification dated 18.07.1994 - whether the import could be treated as a free gift to enable the appellant to claim the benefit of the exemption notification?

HELD THAT:- In view of the amendment incorporated in clause (b) of clause 3 on 08.03.2002, the capital investment cost of the Agro-Processing Component (85%) was to be provided as a ‘grant’ and the working capital (15%) was to be provided as a loan to be repaid in a revolving fund - In the present case, the machinery and plant was a capital investment and so the cost was provided as a grant. A grant has been defined in Chambers Dictionary as something bestowed, an allowance; ‘a gift’.

It would be seen from the Agreement that though initially the cost of Agro-Processing Component under clause 3 of the Annexure-A (Technical and Administrative Provisions) was to be transferred to the Project by the Government of India as a loan of 4.108 million euro, but subsequently an amendment was incorporated on 08.03.2002. The amended clause 3 provides that the Agro-Processing Component was increased from 4.108 million euro to 7.196 million euro and out of this amount, the capital investment cost (85%) was to be provided as a ‘grant’ and the ‘working capital’ (15%) was to be provided as a loan to be repaid in a revolving fund. Thus, the plant and machinery, which would be included in the capital investment cost, was provided as a ‘grant’ which means as a gift. Clause 8 of the exemption notification would, therefore, be satisfied.

This factual portion is also reflected from the Certificate dated 09.11.1999 given by the European Union. The Certificate clearly mentions that the plant and machinery was gifted free of cost to the Programme under the bilateral Agreement between the Government of India and the European Union - the Commissioner (Appeals) failed to notice the amendment made in clause 3(b) of Agreement while recording a finding that the plant and machinery was provided on a loan which was to be repaid.

On a plain reading of the Agreement, it is clear that clause 8 of the exemption notification stands satisfied - appeal allowed.