TMI Blog2013 (3) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonally heard. The 2400 MW Power Project can be considered to be setting up of new power plant by SPL and cannot be considered to be an “expansion project”, in the hands of appellant, with reference to 220 MW power plant. The goods covered by Bill of Entry filed by appellant cannot be classified under CTH 9801 and consequently the benefit of project import and exemption under Notification No 21/2002-Cus., read with Notification No. 65/2011-Cus., are not admissible to appellant. The goods covered under the aforesaid two Bills of Entry filed by SPL are liable to be assessed to duty under the respective Headings and, upon such assessment, SPL will be liable to pay the duty and clear the goods in accordance with law. The appeals are disposed of in the above terms. - C/367 and 460/2012 - 511-512/2012 - Dated:- 31-7-2012 - Shri P.G. Chacko and M. Veeraiyan, JJ. Shri S. Jaikumar, B. Venugopal and M. Karthikeyan, Advocates, for the Appellant. Shri P.R.V. Ramanan, Special Counsel, for the Respondent. [Order per : P.G. Chacko, Member (J)]. - Two Bills of Entry Nos. 4875426 and 4875427, both dated 10-10-2011, were filed in the name of M/s. Samalkot Power Ltd. (SPL, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Association and Article of Association for Samalkot Power Ltd., (xi) Clearance from Ministry of Environment and Forests - (xi. 1) J130212/134/2009-I.A.II (T), dated 21-9-2011, (xi. 2) J130212/37/2009-I.A.II (T), dated 28-5-2011, (xi. 3) J130212/37/2009-I.A.II(T), dated 26-4-2011, (xii) EPC Contract Copy between M/s. Samalkot Power Ltd. and M/s. RELIANCE Infrastructure Limited, along with all amendments, (xiii) Off Shore Supply Contract between M/s. RELIANCE Infrastructure Limited and Reliance Infra Projects International Ltd., along with an amendment, (xiv) Contract (Ref EOI/23050957), dated 29-7-2011 for supply of Pre-Engineered Power House Building Structures between M/s. RELIANCE Infrastructure Limited and M/s. Zhejiang Hanxiao Steel Structure Co. Ltd., (xv) Provisional Mega Power Project Status Certificate No. 4/25/2010-Th-1, dated 21-9-2011, (xvi) Notification No. 65/2011-Cus., dated 21-7-2011, (xvii) Marine Insurance Held Cover Note Copy of Samalkot Project, (xviii) Plot Plan of the Samalkot Project. 3. Certain queries made by the Deputy Commissioner apropos of SPL s application were answered by the party in a reply dated 15-10- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) If any amendments were sought in respect of (i) copies of such applications. (iii) Clearances given by various Central Government/State Government departments including subsequent amendments concerning (i), (ii) above. VI. (i) What is the total project cost and out of the project cost what is the cost related to imports? (ii) How is the project is being funded? (iii) If the Bankers/Financial institutions are fully or funding imports, copies of the financial sanctions (loan) sought for and copies of the sanction letters issued by these institutions along with terms and conditions. VII. The documents showing share holding of Samalkot Power Limited. 5. The goods were subjected to first check procedure on 24-10-2011. The markings on the packages, recorded in the examination report dated 24-10-2011, indicated that the goods had been imported for Samalkot expansion project . 6. On the basis of the facts gathered from a comprehensive scrutiny of all the records hereinbefore referred to and after considering SPL s replies to queries, the Deputy Commissioner issued notice dated 25-10-2011 calling upon SPL and RIL to show cause why - (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65/2011 dated 21-7-2011 are admissible. (b) Whether the provisional Mega Power Project Status Certificate dated 21-9-2011 and the amendment dated 4-10-2011 issued by the Ministry of Power are valid documents for claiming duty exemption under Sl. No. 400(b) of Customs Notification No. 21/2002 dated 1-3-2002 read with Notification No. 65/2011-Cus., dated 21-7-2011. (iii) Whether M/s. Samalkot Power Ltd s request; for classification/assessment under 98.01 of Customs Tariff Act, 1975 and application dated 24-9-2011 for registration of the aforementioned contract dated 31-7-2010 with it s amendments under Project Import Regulations, 1986, is admissible when considerable items/goods required for the said project have already been imported and cleared on payment of duty on merits without registering under Project Import Regulations, 1986. (iv) Whether the goods covered under Bills of Entry No. 4875426 and 4875427, both dated 10-10-2011 are to be assessed under their respective CTH sub-headings by charging duty on merits. After elaborate discussion of the facts of the case, appraisal of documentary evidence, examination of legal provisions and consideration of case law, the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore the certificate dated 21-9-2011 of the MoP is related to substantial expansion of the existing 220 MW power plant is unsustainable. (b) The existing 220 MW power plant and the 2400 MW power project are based on two different technologies and independent of each other. The latter cannot use the transmission lines and other electrical auxiliaries of the former due to the difference in Generation Voltage. The new plant being set up will be a stand-alone power plant of 2400 MW capacity which can independently function even if the old one of 220 MW capacity is shut down. [Copies of certificates/letters issued to SPL by experts have been produced - these are authored by (i) Mohan Tahiliani of Black Veatch Corporation, (ii) H.L. Bajaj, former Chairman, Central Electricity Authority, and (iii) R.D. Gupta, former Director (Commercial) of National Thermal Power Corporation]. Therefore the 2400 MW power project cannot be held to be an expansion project in relation to the existing 220 MW power plant. (c) The Essentiality Certificate dated 23-9-2011 duly issued by the Principal Secretary (Energy) to Govt. of Andhra Pradesh, qua Sponsoring Authority under the Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration of the contract under the PIR. It was not available to SPL even when the order-in-original was passed by the Deputy Commissioner. However, it was produced before the Commissioner (Appeals). The department has given acknowledgement of receipt of the essentiality certificate on 10-1-2012. Therefore the observation made by the learned Commissioner (Appeals) that SPL did not produce the sponsoring authority s recommendation letter is factually incorrect. (i) It was held by this Bench of the Tribunal in the case of B.E.M.L v. Commissioner - 2006 (201) E.L.T. 60 (Tri.-Bang.) that a certificate of registration of contract under the PIR was required to be produced before clearance of goods for home consumption. Therefore, in the present case, the non-production of essentiality certificate along with SPL s application for registration under the PIR cannot be fatal. (j) There is no requirement for recommendation letter from the sponsoring authority after the insertion of Condition No. 86(aa) in Notification No. 21/2002-Cus., which overrides the requirement where the assessment is provisional as in the present case. (k) M/s. Reliance Power Ltd. (RPL, for short) signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication cannot be denied to SPL. (n) RIL sold the goods to SPL at the high seas under agreements in accordance with international trade practice. SPL as the high seas buyer of the goods became the owner of the goods and this fact was also endorsed on the Bills of Lading and thereby SPL became entitled to file the subject Bills of Entry as importer of the goods as defined under Section 2(26) of the Customs Act, The title to the goods had passed from RIL to SPL. That the endorsed Bills of Lading were not produced by SPL at the time of filing the Bills of Entry is no ground to hold that SPL is not the importer. The Foreign Trade Policy permits high seas sales of goods for importation into India. The above sale of goods at high seas by RIL to SPL was lawfully effected in keeping with the requirements of C.B.E. C. s Circular No. 32/2004-Cus., dated 11-5-2004. 10. The case of RIL (a) RIL is not the importer of the goods covered by the two Bills of Entry dated 10-10-2011, for which SPL is the importer as per Section 2(26) of the Customs Act. The title to the goods was passed to SPL by way of high seas sale of the goods by RIL to SPL. After the high seas sale of the goods, SP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital goods and cleared the same on payment of duty to the tune of Rs. 304 cr. between 9-6-2011 and 17-11-2011. Thus RIL, as the party duly authorized to import the goods required for the expansion project, held itself out to be the importer of capital goods for setting up the power plant. Therefore both the authorities below rightly held RIL to be the importer of the goods covered by the subject Bills of Entry also. (d) Only in respect of two consignments presented on 10-10-2011, SPL projected itself as the importer and filed Bills of Entry. Obviously they did so after realizing that RIL being only the EPC Contractor was not eligible to claim exemption under Notification No. 21/2002-Cus. as amended. (e) The original high seas sale agreements were not produced by SPL to substantiate their claim of having purchased the goods from RIL at the high seas. High seas sale was set up to claim the benefit of the Notification. (f) All the approvals and clearances had been obtained by RIL from various Government Ministries/Departments/Agencies (MoEF of Government of India/Irrigation Department of Government of Andhra Pradesh/Energy Department of Government of Andhra Pradesh/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its assignment to SPL are not legally valid, the provisional Mega Power Project Status Certificate issued to SPL by the MoP cannot be accepted as valid. (k) Only photocopies of high seas sale agreements were produced by RIL. SPL cannot, therefore, be held to have established a title to the goods covered by the subject Bills of Entry. (l) Even after SPL applied for registration of the contract in September 2011, imports were made by RIL. 32 consignments of capital goods valued at Rs. 1259.69 cr. were so imported by RIL and cleared on payment of duty at merit rates. (m) The expression all goods appearing in Chapter 98 of the CTA Schedule implies that the registration should cover all imported goods. The benefit of project import under Heading 9801 should be claimed in respect of all the goods imported for the purpose of the project. The importer has no option to claim the benefit of project import in respect of some consignments and to clear other consignments on payment of duty. Once a contract for project import in registered with the Customs House, its de-registration in full or part is not permissible as clarified in C.B.E. C. s Circular F.No. 528/213/87-Cus. (TU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged that the provisional Mega Power Project Status Certificate be withdrawn. The MoP s reply to this request of the Commissioner of Customs and Central Excise, Visakhapatnam-II, has been perused at our end. This letter No. 4/35/2010-Th-I (Vol-I), dated 2-4-2012 of the Director (IPC), Ministry of Power, Government of India is seen to have been issued with the approval of the Joint Secretary (Thermal). Going by the tenor of this letter, we find that the MoP has confirmed that SPL complied with the guidelines issued by the Ministry and fulfilled the requirements for provisional Mega Power Certification. The Ministry appears to have offered this clarification in consultation with the Central Electricity Authority. The MoP s letter dated 2-4-2012 states inter alia that a thermal power plant of capacity 1000 MW or more is eligible for provisional Mega Power Status irrespective of whether it is an expansion project or a Greenfield project. Accordingly, the Ministry has found it inappropriate to withdraw the provisional Mega Power Status Certificate issued to SPL. (c) SPL has expressed their willingness to comply with Condition No. 86(aa) introduced by Notification No. 65/2011-Cus., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other conditions including condition 86(aa). With regard to condition 86(aa), we find that the production of the provisional Mega Power Project Status Certificate of the MoP before the Deputy (Commissioner of Customs has ipso facto rendered this condition applicable. This condition, apparently, provides for provisional grant of exemption to the importer against production of a provisional Mega Power Project Status Certificate from the MoP and furnishing of a Fixed Deposit Receipt from any Scheduled Bank for a minimum term of 36 months for an amount equal to the duty of customs payable on the imported goods but for the exemption. The importer has to produce the final Mega Power Project Status Certificate within a period of 36 months from the date of importation. SPL is said to be willing to do so. (d) The text of entry 400 of Notification No. 21/2002-Cus. pertains to goods required for setting up of any Mega Power Project so certified by the specified authority. The entry classifies the good under CTH 9801, which takes us to Chapter 98 of the CTA Schedule. Chapter Notes 1 and 2 being relevant are reproduced below : Notes : 1. This Chapter is to be taken to apply to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be prudent to hold that, in the hands of SPL, the said project is an expansion of the existing 220 MW power plant of RIL. The opinion of three experts, brought on record by the counsel for SPL, is unanimous to the effect (a) that the existing 220 MW power plant and the proposed 2400 MW power plant are based on two different technologies (Siemens V94.2 technology and General Electric Frame 9FA technology respectively), (b) that there are no shared mechanical or electrical auxiliaries between the two power plants, (c) that the proposed 2400 MW cannot use the transmission line of the existing 220 MW power plant due to the difference in generation voltage, (d) that the 2400 MW power plant cannot use the gas and water pipelines of the existing power plant of small capacity, and (e) that any one power plant can independently function even when the other one is shut down. This evidence adduced on behalf of SPL has not been contested before us. Considering the technological, operational and other differences between the two power plants certified by the experts, we hold the view that the 2400 MW power project cannot be considered to be an expansion project , in the hands of SPL, with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds covered by the subject Bills of Entry dated 10-10-2011 can be classified under CTH 9801 and assessed with grant of the benefit of project import to SPL : We have already referred to the terms of Heading 9801 and the two relevant Chapter Notes in Chapter 98 of the CTA Schedule. The expression all goods used in the two Chapter Notes is significant, and so is the expression all items used in the text of Heading 9801. The phrase all items of machinery including ... required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified ... power project means, to our mind, that the whole lot of items required for the setting up of a power plant or for the substantial expansion of an existing power plant will constitute a bundle or cluster to be covered by Heading 9801. The Chapter Notes appear to support this legal fiction embodied in Heading 9801. If some of the items/goods are removed from this bundle, the residue will not go to constitute a new power plant or an expanded power plant. Therefore, it is imperative that, for classification under Heading 9801, the bundle of items/goods must be complete so as to be considered to be requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s., dated 1-3-2002 (Sl. No. 400). 13. In view of the above findings, it is ordered as under : (i) The question whether SPL acquired title to the goods said to have been sold to them at the high seas is remanded for fresh consideration. They should be given a reasonable opportunity of adducing evidence and of being personally heard. (ii) The 2400 MW Power Project can be considered to be setting up of new power plant by SPL and cannot be considered to be an expansion project , in the hands of SPL, with reference to 220 MW power plant. (iii) The goods covered by Bill of Entry No. 4875426 dated 10-10-2011 and Bill of Entry No. 4875427 dated 10-10-2011 filed by SPL cannot be classified under CTH 9801 and consequently the benefit of project import and exemption under Notification No 21/2002-Cus., dated 1-3-2002 [Sl. No. 400(b)] read with Notification No. 65/2011-Cus., dated 21-7-2011 are not admissible to SPL. (iv) The goods covered under the aforesaid two Bills of Entry filed by SPL are liable to be assessed to duty under the respective Headings and, upon such assessment, SPL will be liable to pay the duty and clear the goods in accordance with law, subject, of cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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