TMI Blog2014 (3) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... erials imported and the unit/projects where they are going to be used. It is an admitted position that the materials have been imported after the machinery have been already supplied to a project. If the machinery has already been supplied to a particular project, usage of the imported raw materials for the manufacture of machinery which is required to be supplied to a specific project cannot happen at all and, therefore, it is clear that the appellants have not complied with the terms and conditions of the Project Import Regulations. It is very clear the even before placing the order, the appellant have declared that the raw material is being imported for the initial assembly of capital goods required for the Project. The appellant have also made declaration that they shall be liable for any legal action and penalties as per the relevant Customs Tariff Act as amended form time to time in case of diversion of the goods imported under concessional duty or misuse of the imported material. The electrical steel sheets were diverted for the manufacture of other goods which were supplied to various customers, perhaps for some other Projects also. Under these circumstances, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of the quantity required by them for manufacture of transformers for the specified project. In certain cases it was observed that the import under the Project Import Scheme had taken place after the transformers had been manufactured and dispatched to the project site by the importer. Statement of the Dy. General Manager (Materials) of the appellant-firm was recorded on 13/09/2000 wherein he was asked about the project undertaken in respect of M/s Haldia Petro. In his statement the said official confirmed that in respect of the said project, transformed has been manufactured and dispatched from the factory even before the imported material had been cleared by the Customs and when he was questioned about what was done with the imported material, he evaded a direct answer and stated that the duty element saved on has been passed on to the project authority. From the investigation conducted it came to light that the appellant imported CRGO steel and copper in excess of the requirement of the specific project and the imported material had not been used for the project for which it was intended but was diverted. Thus, it appeared that the appellant had violated the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the appellant made the following submissions. 3.1 The contracts for the projects which they entered into, provided for a strict delivery schedule and a penalty if the delivery was not made on time. The total time required from the date of purchase order to actual import of raw materials under the Project Import Regulations is about 15 months and the time taken for manufacturing a transformer is at least three months. Therefore, if they had waited for 18 months to import the raw materials and manufactured the transformer s for the specified project, they would not have been able to deliver the transformers on time and they would have been liable to pay liquidated damages for the delay. Therefore, in order to meet the delivery schedule, they did not wait for the imports under Project Import Regulations but utilised similar raw materials lying in stock with them, which was either duty-paid imported raw materials or raw materials imported under DEEC scheme in respect of which they had discharged the export obligation. However, they had passed on the benefit of concessional rate of duty under the Project Import Regulations to the customers even though they had utilised duty-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no necessity for any one-to-one correlation between the raw materials imported and the goods manufactured and supplied to a specific project. Inasmuch as they have substantially complied with the provisions of these Regulations, the ratio of the decision of this Tribunal in the case of BSES Kerala Power Ltd. vs. Commissioner of Customs, Cochin 2006 (196) ELT 246 (T) would apply. They have not indulged in evasion of Customs duty whatsoever and the imported goods were used in the manufacture of transformers for other projects and all such contracts have been fulfilled and there is no allegation that they have diverted the imported materials in the open market. There is no bar or restriction in the use of imported inputs which have been assessed at concessional rate of duty under heading 98.01 to other projects. As regards the extended period of time invoked in respect of the notice dated 23/01/2002, it is their contention that they have not mis-declared or mis-stated any facts willfully and, therefore, the extended period of time should not have been invoked and they rely on the decision of the hon'ble apex Court in the case of Cosmic Dye Chemical vs. Collector 1995 (75) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Industries Ltd. vs. Commissioner of Central Excise, Pune 2004 (171) ELT 296 (SC) and Collector of Central Excise, Meerut vs. Modi Rubber Ltd. 2001 (133) ELT 515 (SC). Accordingly, he prays for upholding the impugned order. 5. We have considered the rival submissions. 5.1 It will be relevant at this juncture to consider the wordings of Chapter 98 relating to Projects Imports so that the issue arising for consideration can be appreciated better. Note 2 to Chapter 98 and Tariff Description of heading 98.01 are reproduced below: 2. Heading 9801 is to be taken to apply to all goods which are imported in accordance with the regulations made under section 157 of the Customs Act, 1962 (52 of 1962) and expressions used in this heading shall have the meaning assigned to them in the said regulations. 9801 All items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment (including those required for research and development purposes, testing and quality control), as well as all components (whether finished or not) or raw materials for the manufacture of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory corporation, public body or Government undertaking run as a joint stock company (hereinafter referred to as Government Agency ) as soon as clearance from the concerned sponsoring authority, as the case may be, has been obtained. (3) The application shall specify - (a) the location of the plant or project; (b) the description of the articles to be manufactured, produced, mined or explored; (c) the installed or designed capacity of the plant or project and in the case of substantial expansion of an existing plant or project the installed capacity and the proposed addition thereto; (d) such other particulars as may be considered necessary by the proper officer for purposes of assessment under the said heading. (4) The application shall be accompanied by the original deed of contract together with a true copy thereof, the import trade control licence, wherever required, and an approved list of items from the concerned sponsoring authority. (5) The importer shall also furnish such other documents or other particulars as may be required by the proper officer in connection with the registration of contract. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular project cannot be established. That is the reason why the Project Import Regulations envisage registration of the contract for a specified project. In the case before us it is an admitted position that the materials have been imported after the machinery have been already supplied to a project. If the machinery has already been supplied to a particular project, usage of the imported raw materials for the manufacture of machinery which is required to be supplied to a specific project cannot happen at all and, therefore, it is clear that the appellants have not complied with the terms and conditions of the Project Import Regulations. 5.4 The issue has been examined in detail by the adjudicating authority who in para 7 of the impugned order has recorded a categorical findings as follows: 30. From the char of consumption of CRGO sheets and copper filed with their reply dt. 26/10/2004 it is evident that during the years 95-96 to 99-2000 (period covered by the two Show Cause Notices), imports under Project Import Scheme ranged from 2.7% to 28.9% of the total of the CRGO and copper sheets procured by them from all sources and used in the manufacture of transformers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concessional project import rate for the replacement imports. The facts of the case were that the appellant therein, M/s. BSES Kerala Power Ltd. had an agreement with Kerala State Electricity Board for the initial setting up and generation of power plant at Udyogmandal and after completing the formalities they imported certain parts. During the execution of the project, it was noticed that three numbers of rotable hot section assemblies which are very essential for power generation had to be replaced and the replacements were received and cleared at concessional rate of duty applicable to project imports. The Revenue contended that the replaced items did not form part of the original contract but was part of an independent contract. The Tribunal held that once the contract is registered, items imported under the contract are entitled to project import benefit. Inasmuch as the contract was registered, the Tribunal extended the benefit to replacement parts also as they were for the same specified project. In other words, in that case also there was no usage of the imported goods for project other than the specified one. Similarly the reliance placed on Zuari Industries Ltd. case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he huge time lag involved in obtaining permission under the Project Imports, they were forced to utilize the materials imported earlier in lieu of the materials to be imported under the Project Import Regulations. In other words, they are pleading hardship or inconvenience in following the terms and conditions of the Project Import Regulations. This argument of the appellant has no merits. The hon'ble apex Court in Shankar Raju vs. Union of India 2011 (271) ELT 492 (SC) observed as follows: Where the Legislature clearly declares its intent in the scheme of a language of Statute, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy and without engrafting, adding or implying anything which is not congenial to or consistent with such express intent of legislature. Hardship or inconvenience cannot alter the meaning employed by the Legislature if such meaning is clear on the face of the Statute. If the Statutory provisions do not go far enough to relieve the hardship of the member, the remedy lies with the Legislature and not in the hands of the Court. Therefore, the argument of hardship or inconvenience in following the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port obligation can be fulfilled in advance and raw materials required for the manufacture of the export products can be imported subsequently by availing the benefit of exemption. Similarly, in the case of duty-free replenishment scheme, imports can be made duty-free for replenishing the materials already used in the manufacture of the exported products and in those cases also one-to-one co-relation is not required. In other words, wherever the legislature wanted flexibility with regard to use of materials without any nexus between the imported materials and the exported product, the legislature devised a scheme to that effect. If the intention of the legislature was to provide such flexibility in the project import scheme, they would have specifically provided for the same either in the Tariff entry itself or in the Project Import Regulations. In the absence of such a provision, it cannot be presumed that the legislature did not envisage one-to-one co-relation between the imported goods and the projects in which they would be used. 5.14 Coming to the issue of confiscation in the case of goods already cleared and where the assessments had already been finalised, the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sustain. 5.16 The next issue for consideration is whether the goods are liable to confiscation and whether fine can be imposed in lieu of confiscation and whether penalties can be imposed on the appellant. In this context it should be remembered that in respect of 12 contracts where the assessments were provisional, the goods were released to the appellant on the strength of a bond and bank guarantee submitted by the appellant. In other words, it was only a provisional clearance. At the time of final assessment, when the violations were noticed of the Project Import Regulations, Section 111(o) of the Act comes into play for violating the end-use terms and conditions of the exemption. Therefore, as has been held by the hon'ble apex Court in the case of Jacsons Thevara , cited supra, the goods are liable to confiscation and the appellants are also liable to penalty and, therefore, imposition of fine on the goods and imposition of penalty on the appellant is not prohibited in law. The hon'ble apex Court in the case of Weston Components vs. Commissioner 2000 (115) ELT 278 (SC) upheld the confiscation and imposition of fine on the confiscated goods when the goods had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncession in customs duty for project(s) was introduced way back in 1965 when the country was in the need of set up of major projects and industries for industrialization of the country. The provision was made for import under the specified heading 9801 of the Customs Tariff Act for items like machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipments as well as components or raw materials for manufacture of machinery and their components required for initial set up of a unit or substantial expansion of specified industrial project, power project etc. Thus, it is a fact that not only machinery can be imported for setting up of a new industry or plant, but even raw material for fabrication of plant and machinery can also be imported. There cannot be same standards of compliance for import of machinery and/or import of raw material for fabrication of plant and machinery. 8.2 The appellant is a manufacturer of transformers etc. which are normally required for power plant and/or captive power plan. The appellant has given details of time taken at various stages for import of raw material for fabrication and supply of the machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for manufacturing activity (approx) 3 months Total 18 months Period of contractual delivery as per Purchase Order (Refer point no. 8 of the PO) 6 months Liquidated damage @ 0.5% (minimum) of value (Rs.26,20,000/-) per week of delay 6,28,800/- LD @ 5% (maximum) of value per week of delay 62,88,000/- 8.3 From the purchase order at Exhibit A, it is evident that the purchase price as per purchase order is ₹ 26,20,000/- to be delivered ex-works which includes packing and forwarding charges. Clause 9 of the purchase order read with clause 8 provides that delivery period is 6 months from the date of placement of Letter of Intent (LOI) or order whichever is earlier and will be subject to liquidated damages for delay which will be payable @0.5% per week subject to a maximum of 5% of the value of order. 8.4 Thus, it is evident that time was the essence of the contract. Timely completion of the purchase order by the appellant was in national interest so as to facilitate timely completion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials, to the customers/project. 8.7 From perusal of the show-cause notice, it is seen that there are basically three allegations against the appellant. The first being goods imported under the Project Import Scheme are not used for the specified project, second-for the purpose of project, raw materials have been imported in excess than actually required for the fabrication of the transformers required for the project, and thirdly the fabrication was started and or completed and supplied even before the arrival of the raw material at concessional tariff under the scheme, in some cases. 8.8 From the findings recorded by the Commissioner, it is seen that the Commissioner have taken a view that as the fabrication was started in some cases prior to arrival of the requisite raw material under the scheme or in some case even fabrication of the transformer was completed and supply made before the arrival of the requisite raw material. The Commissioner has taken the view by quoting regulation 4 of the Project Import Regulation, 1986 that one-to-one correlation is essential for eligibility for availing the concessional tariff of duty. The Commissioner has relied on the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the underlying intention was to reduce the cascading effect of duty only. 8.14 In the case of beneficial legislation, once the eligibility criteria' is met for the other allied conditions a purposive interpretation needs to be adopted. Where e.g. water is required to be drawn from a tank for irrigation, it is immaterial from which side of the tank water is drawn for irrigation. 8.15 In view of the aforementioned observations, I hold that the appellant have complied with the conditions of the Project Import Regulations' and the benefit of concessional duty cannot be denied. 9. Thus the impugned order is set aside and quashed. The appeal is allowed. 21.1.2013 Anil Choudhary, J. The difference of opinion as detailed below is placed before the Hon'ble President/HOD for reference to the 3 rd Member:- (a) Whether the appellant is not eligible for the benefit of Project Import Concession under CTH 9801 and consequently the imported goods are liable to confiscation with option to redeem the same on payment of fine and the appellant is liable to penalty as held by the Hon'ble Member (Technical) placing reliance on the decision of the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd vs CCE, Chennai reported in 2009 (234) ELT 412 (Mad) to further his argument that purposive interpretation should be adopted to effectuate main intention of the Notification. He also quoted the judgment of the Hon'ble Madras High Court in the case of M/s Nirma Ltd. Vs. Saint Gobain Glass India Ltd. reported in 2012 (281) ELT 321 (Mad) to bring the point fiscal law is to be construed strictly while the Economic Legislation is construed with intention of developing domestic industry. He also quoted the judgment of this Tribunal in the case of Punjab Worsted Spg. Mills Vs. CCE, Chandigarh reported in 2001 (136) ELT 1016 (Tri-Del) to submit that penalty is not imposable in case of provisions assessments which were being finalized. 10.4 On issue of limitation, the learned advocate quoted this Tribunal decision in Sujana Metal Products Ltd. Vs. CCE, Hyderabad reported in 2011 (273) ELT 112 (Tri-Bang). Similarly another judgment of this Tribunal in the case of Mexin Adhesive Tapes vs CCE reported in 2013 (291) ELT 195(Tri-Ahd) was pressed to bring out the point that limitation and penalty cannot be imposed on issues involving interpretation/discussion of law and rules. 11.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch meaning is clear on face of statute If statutory provisions do not go far enough to relieve hardship, remedy lies with legislature and not in hands of Court. 12.1 I have gone through the orders recorded by both learned brothers as also various submissions made by both sides before me. Classification of goods under the Project Import is with an idea of facilitating the assessment and faster clearance of the goods by Customs in respect of Projects. Chapter V of the Customs Manual which was referred to by the learned A.R. is reproduced below: 1. The Project Import Scheme' is an Indian innovation to facilitate setting up of and expansion of industrial projects. Normally, imported goods have to be classified separately on merits' under the Customs and Excise Tariffs for levy of duty. This implies that each individual article has to be classified and assessed to appropriate duty but also for the purposes of Countervailing Duty (CVD). For setting up of a project', a number of goods may be imported in one or many consignments. If all goods are required for the project are to be classified and valued separately for assessment to duty, the process becomes cumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mport. These have to be looked into by respective person. 12.3 However, it is to be noted that the Government has also used the Project Import classification at times to grant a lower rate of duty for certain Projects by issue of exemption notification. Similarly, lower rates of duty have been prescribed at times to boost industrialization of a particular sector. However, such steps by the Government are normally through exemption notification. Even when capital goods are imported classifying under Chapters 84, 85, 90 or other Chapters, exemption Notifications issued are with a view to encourage industrialization in that particular sector. For example, a lower rate of duty is prescribed for manufacture of jewellery or diamond processing, the same may be with an idea to boost jewellery and diamond processing centers. Thus in my view classification under 98.01 is for case of assessment and clearance by Customs while exemption notification are with a view to encourage particular sector. 12.4 In the present case, Power Projects have been given a lower rate of duty by exemption Notification No. 90/94-Cus dated 1.3.1994. However, before availing the benefit of said notification goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to get a Certificate from the Project authority i.e. the Steel Authority of India in this case. Similarly another one month period has been given for making an application. I have gone through copy of the application. There does not appear to be any reason for requiring such a long time because even before getting an order applicant would have estimated how much and what type of CRGO sheets are required. Nine months have been indicated for getting a recommendation letter from the Ministry of Industry. If the appellant has filed all the documents in time and followed up, there does not appear to be any reason for such a long time. In fact to my mind, making an application to Ministry of Industry, placing the order for Import etc. can all be done parallel. Even application for registering the contract under Project Import on provisional basis can be made even if for some reason there is a delay in getting a recommendatory letter from Ministry of Industry. The goods can be imported and cleared by the appellant provisionally under project import at concessional rate or normal rate (and claim refund later on). The appellant has entered into the contractual delivery and highlight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving regard to the economic development of the country notify in the Official Gazette in this behalf; and spare parts, other raw materials (including semi-finished material) or consumable stores not exceeding 10% of the value of the goods specified above provided that such spare parts, raw materials or consumable stores are essential for the maintenance of the plant or project mentioned in (1) to (6) above 12.9 A plain reading of the said description unambiguously states that raw materials required for the manufacture of all items of machinery including prime movers, instruments, ..etc. are classifiable under the said heading. Obviously, after the import, raw materials has to be used in the manufacture of machinery required for the initial setting up of a unit/substantial expansion. While there is no stipulation that importer cannot use raw material imported under different Heading for the manufacture of machinery under Project import but there is definite stipulation that raw material imported under Project Import has to be used in the manufacture of machinery required for that Project. 12.10 I also note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of five years cannot hold such office if he has attained the age of 65 years during the extended period of five years. A combined reading of both parts of Section 8(2) of the Act clearly demonstrates that a member of a Tribunal can hold such office for a fixed and definite period of time, i.e. for a period of five years from the date on which he enters upon his office and that period may be extended for one more term of five years. What is contended before us by the learned counsel for the petitioner is that there is neither prohibition nor any embargo for a member who has completed 10 years as Member to participate in the selection process for being appointed as a Member of the Tribunal for another term of five years. This, in our opinion, is impermissible since the total term that a person can hold the office of the Member of the Tribunal is only for a period of 10 years. In our view, if the office is created by the Legislature under due authority, it may fix the term and alter it. We can understand the heart burn of a person who has served as Member of the Tribunal for ten years and thereafter, is ineligible for being appointed as a Member of the Tribunal. We cannot help this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Advocate has given lot of emphasis or purposive interpretation of law. When the law is clearly written and there are no two interpretation of that law, the concept of purposive interpretation of law cannot be other than what the law states. In my view, appellant is trying to justify his actions in the name of purposive interpretation. As explained earlier, Customs Duty is duty on the import of goods. Associated conditions, obligation and benefits are related to those goods alone here appellant has given false declarations to get the letter from Ministry of Industry violated the conditions on which contract was registered under Project Import Regulation and now on being caught is justifying the action as purposive interpretation of law. 12.13 Learned advocate has quoted Hon'ble Madras High Court judgment in the case of Tamil Nadu Small Industrial Corporation Ltd vs. CCE, Chennai (supra). In the said case the appellant was having number of manufacturing units. Issue was whether each factory can get benefit of SSI exemption under Notification 175/86 or not. An explanation was added in the said Notification, clarifying that where the specified goods are manufactured in a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such condition, subject to just exception cannot be held to be a condition precedent which would disable it from obtaining benefit there from for all times to come. Clearly the said judgment is relating to procedure delay is getting certificate and not applicable to the present case. In the present case goods imported and cleared under heading 9801 were not used for the Project. Procedural delay cannot be compared with diverting or not using the goods imported for the Project. Similarly, another case quoted by the learned Advocate is ONGC Ltd. Vs. Commissioner of Customs, Mumbai reported in 2006 (201) ELT 321 (S.C.). Here again the delay was in production of essentiality certificate. As mentioned earlier, case relating to delay and that of not using the goods imported under Project Import for the Project, are two different things and are not comparable. Another judgment quoted by the learned Advocate is Zuari Industries Ltd. Vs. Commissioner of Central Excise Customs reported in 2007 (210) ELT 648 (S.C.). In this case, during expansion of a fertilizer plant, a power plant was also being set up. The question was whether the power plant can be considered as part of fertilizer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that imported goods or goods manufactured out of imported goods shall be installed only for the project for which such imported goods were cleared under Project Import Regulations, 1986. Relevant declaration is: 3. You should also submit a declaration from the Project Authority that imported goods or goods manufactured out of imported goods shall be installed only for the Project for which such imported goods were cleared under Project Import Regulations, 1986. From the declaration made by the appellant to the Ministry of Industry and also the communication from the Customs House, department was mislead to believe that the material is being imported for the manufacture of capital goods. Further these capital goods shall be installed only for the Project for which such imported goods were cleared under Project Import Regulations, 1986. Further, from the declaration made by the appellant, it is clear that they knew that they shall be liable for any legal action in case of diversion of the goods imported under concessional duty or misuse of the imported material. In the present case it is an admitted position that imported electrical sheets were not used in the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from DTA unit to developer in SEZ and amendment of Rule 6(6) of CENVAT Credit Rule, 2004 was carried on 31.12.2008. Tribunal took view that amendment is retrospective in nature. Further, in the said case, the Tribunal has taken a view that the issue involved interpretation of statutory provisions and in such a case, there is no question of invoking extended period on ground of suppression. Another judgment of this Tribunal quoted by Ld. Advocate is Mexin Adhesive Tapes vs CCE reported in 2013 (291) ELT 195( Tri-Ahd). The issue involved was whether particular goods are covered under Section 4A or not viz. M.R.P. based assessment. The Tribunal has taken a view that the issue involving interpretation of law and rules, no evidence of intention to evade duty by suppression of facts, misdeclaration, fraud etc. hence extended period was not invocable nor penalty is imposable. 13.4 Facts of the present case are totally different. Appellants have cleared goods/obtained Recommendatory letter based upon false declaration, knowing the implications. There is no interpretation of law involved. This is clear from the declaration given by them. 14. In view of the above, I agree with view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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