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M/s. Essar Projects India Ltd. Versus Commissioner of Customs (Port) , Kolkata

2015 (5) TMI 909 - CESTAT KOLKATA

Benefit of project import assessment under Heading 98.01 of CTA,1975 - consignments were imported prior to the registration of the contract - Non fulfillment of mandatory conditions of Regulations (4) &(5) of Project Import Regulations, 1986 - once the classification of the goods imported had been declared at the time of warehousing, by filing into-bond bills of entry, later, at the time of filing the ex-bond bills of entry for home clearance, the classification cannot be altered - Held that:- R .....

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e agree with the contention of the ld. Advocate that even though the judgment laid down in Mihir Textiles case (1997 (4) TMI 75 - SUPREME COURT OF INDIA) passed under the old regulations, however the Hon’ble Supreme Court has categorically held that the contract need to be registered prior to the Order of Clearance was passed. - in terms of Regulation No.(4) of the PIR, 1986, the contract should be registered prior to clearance of the goods and not at the time of warehousing of the goods. In the .....

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ORDER Per Dr. D. M. Misra: This Appeal is directed against the Order-in-Original No.KOL/CUS/PORT/42/2014 dated 10.06.2014 passed by Commissioner of Customs (Port), Kolkata. 2. Briefly stated factsof the case are that the Appellant had filed eleven Bills of Entry during January and February, 2012 in relation to eleven consignments of goods arrived/brought into India during the period, September, 2011 to February, 2012. While filing the said into-bond Bills of Entry for the respective consignment .....

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F.No.S-37C(P)-Proj-09/2012A(6) subject to verification of the essentiality certificate. The said essentiality certificate was later issued by the Ministry of Fertilizers on 30.03.2012 which confirmed that the items certified through various letters in favour of M/s Matrix stands goods for customs clearance by M/s EPIL. Subsequently, the Appellant had filed Ex-Bond Bills of Entry, claiming classification under Chapter Sub-Heading 98.01 & benefit of concessional rate of duty, as applicable to .....

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ed and imposition of penalty under the provisions of Customs Act,1962. On adjudication, the ld. Commissioner of Customs (Port), Kolkata, had finalized the assessment, denying classification under Sub-Heading 98.01 and the benefit under the Project Import Regulations, 1986; also confirmed the demand of differential duty of ₹ 39,62,46,154/-; directed confiscation of the goods; and imposed redemption fine of ₹ 89.00 crore; imposed penalty of ₹ 20.00 crore under Section 112(a) of t .....

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ted with the job of setting up of Green-Field Fertilizers Plant at Panagarh Industrial Area, Durgapur by oneM/s Matrix Fertilizers and Chemicals Ltd. The Appellant had also entered into a separate Contract with M/s. Matrix for supply of certain equipments required for the said Fertilizers Project. For off-shore items, initially it was agreed that the equipments required for the said Fertilizers Project would be imported by the Appellant, and M/s. Matrix would then buy these equipments on High Se .....

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₹ 1818.00 crore, after obtaining the Essentiality Certificate on 01.04.11, issued by the Ministry of Chemicals and Fertilizers Department. The Deputy Commissioner of Customs, Kolkata Customs House, registered the said Contract by allotting the Registration F.No.S-37C(P)Project-21/2011A(6). 3.2. It is contended by the ld. Sr. advocate that subsequently it had been agreed between the Appellant and M/s. Matrix that the off shore supply meant for the said Fertilizers Project, would be cleared .....

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contract in their favour registered in the name of M/s. Matrix. However, it was informed by the department that there is no provision for transfer of Registration under the Project Import Regulations, 1986, and hence their request was rejected. Consequently, a request was madefor cancellation of the Registration standing in the name M/s Matrix and issue ofa fresh application inthe name of the Appellant on 23.03.12. The Customs Authorities issued a new registration in the Appellant s name provis .....

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uthorities had objected to such change in classification under Customs Tariff Heading98.01, and after lot of correspondences with the Department on the direction of the Commissioner of Customs (Port), the goods were provisionally assessed and cleared on furnishing security in the form of two bank guarantees for ₹ 33,00,23,605/- and ₹ 1,10,00,000/- (totaling ₹ 34,10,23,605/-)and cash security of ₹ 5,52,22,549/-to cover the differential duty involved. 3.4. The ld. Sr. Advoc .....

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6 are not complied with.He has also observed that once the goods are classified under a particular heading at the time of filing into-bond bill of entry, the classification cannot be altered to 98.01 of CTA,1975 at the time of clearance of the goods by filing ex-bond bills of entry. 3.5. Ld. Sr. Advocate argued that interpretation of clauses (4) & (5) of the Project Import Regulations, 1986 recorded by the Ld. Commissioner, is erroneous. Under Clause (4) of the said Regulations, it is made c .....

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f entry. 3.6. It is his submission that there is a marked difference between the Project Import (Registration of Contract) Regulations, 1965 and the present provisions of Project Import Regulations, 1986. Under the earlier provisions read with Customs Tariff Heading 84.66 of CTA, 1975 it is necessarythat such contract or contracts has or have been registered before any order is made by the proper Officer of Customs permitting the clearance for home-consumption or depositing any warehoused items. .....

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e judgement of the Hon ble Supreme Court in the case ofMihir Textiles Ltd. Vs Collector of customs, Bombay 1997 (92) ELT 9(SC). It is his contention that the conclusion arrived at by the ld. Commissioner is the result of an erroneous and improper application of the ratio of the said judgment to the facts of the present case. The Ld. advocate Referring to para 7 of the said judgment, submitted that after analysing the provisions of tariff entry 84.66, their Lordships had observed that the conditi .....

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fore the court, the Contracts were not registered at all before the order of the clearance was passed. They Ld. Advocate has submitted thatin contrast to the facts of this aid case, in the present case, the Contracts were registered on 29.03.2012 and request for clearance for home consumption had been made thereafter. 3.8. The ld. Sr. Advocate in support of his contention has placed reliance on the decision of this Tribunal in the case of Bharat Earth Movers Ltd. Vs. CC, 2006(201)ELT 602(Bang.). .....

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registered before filing into bond bills of entry and the goods were warehoused for availing the benefit of assessment under Project Import Regulations, is contrary to the said judgment and accordingly, bad in law. 3.9. The ld. Sr. Advocate further submits that the reasoning of the ld. Commissioner that once the classification has been declared in the into-bond bills of entry, the same cannot be changed in the ex-bond bills of entry, as the assessment is almost final in relation to the classific .....

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CC, 2007(220)ELT 246 (Tri.-Ahmd.). It is his contention that when the goods have to be assessed or re-assessed to duty, it cannot be said that the re-assessment be limited to the same Tariff Heading, under which the goods were earlier assessed, and it is only for the purpose of checking the rate of duty on account of any change made therein and nothing beyond it. Thus, the Tariff Heading could certainly be revised in case the necessity arises in this regard, at the time of clearance of ex-bond g .....

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n imported/cleared underProject import Regulations. 3.11 The Ld. Sr. Advocate has further submitted that this Tribunal in the case of Pratibha Industries Ltd. Vs. CC, NhahaSheva, 2005 (188) ELT 438 (Tri.-Mum.), had not interpreted correctly the principle laid down in Mihir Textile Ltd. Vs. CC,Bombay 1997 (92) ELT 9(SC), Ajanta Offset and PackagingLtd.Vs. CC 1997 (94) ELT 443(SC), and Dunlop India Ltd. Vs. CC 1997(95) ELT 162(SC). The plea of the assesseethat since out of charge Order has not bee .....

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erring to the meaning of import referred to in the said Regulation 5 and interpreted by the Hon ble Supreme Court in Gardens Silk Mills & Kiran Spg. Mills case(supra). Hence, the said judgment cannot be considered as a binding precedent. 3.12. The ld. Sr. Advocate further submitted that the meaning of import, as recorded by the ld. Adjudicating Authority, is erroneous and contrary to the principle of law laid down by the Hon ble Apex Court in GardenSilk Mills Ltd. vs. UOI, 1999(113) ELT 358. .....

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ng the definitions of import & India , as prescribed at Section 2(23) and 2(27) of Customs Act,1962 their Lordships had observed that the import of goods into India would commence when the same cross into territorial waters, but it is completed, when the goods become part of the mass of the goods within the country.. In the case of goods which are in the warehouse the Customs barrier would be crossed when they are sought to be taken out of the Customs control and brought to mix with the mass .....

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March 2012. Therefore, the future imports that would be effected under the said contract registered on 29th of March 2012, cannot be denied to the benefit of project import assessment. 3.14. The ld. Sr. Advocate further submitted that through Right to Information Act( RTI), they had collected information from various other customs house revealed that the classifications declared at the time of filing into-bond bills of entry against the respective sub-headings, were later allowed to be changed .....

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e to Project Import assessment benefit, as has been held in the case of PratibhaIndustires s case (supra). It is his submission that registration not having been done on or before importation, the benefit of Project Import, cannot be extended to the Appellant. 4.1 Further, Analyzing the judgment of the Hon ble Supreme Court in Garden Silk Mills case (supra), he submits that the observation of the Hon ble Supreme Court at para 16 of the said judgment consists of two parts. In the first part it de .....

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home-consumption, is filed, if at all, at a later date. 4.2 It is his submission that the eleven consignments in question were imported prior to registration of the contract and the mandatory requirement, as prescribed under Regulation (5) of PIR,1986 , has not been complied with. It is his submission that once the mandatory provision of Project Import Regulations, is not complied with, then in accordance with Note:2 of Chapter 98 of CTA,1975, they should not be eligible to the benefit of Headi .....

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o such consignment would be entitled to avail the benefit, as has been held by the Hon ble Supreme Court in the case of Dunlop India Ltd s case(supra). 4.3 In his rejoinder, the ld. Sr. Advocate has submitted that mixing of the imported goods with the land-mass cannot be construed as completion of the process of import of the goods into India, after crossing the territorial waters and entering into India; on the contrary when the goods are cleared from the Customs barrier, mixes with the mass of .....

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t assessment under Heading 98.01 of CTA,1975 read with Project Import Regulations, 1986. 5.1 While denying the said benefit, the ld. Adjudicating Authority anchored his observation on a two-fold reasoning. He has held that since the said consignments were imported prior to the registration of the contract, therefore, mandatory conditionsof Regulations (4) &(5) of Project Import Regulations, 1986, have not been satisfied; secondly, once the classification of the goods imported had been declar .....

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lations, the requirement of Registration of the contract is on or before clearance of the imported goods rather than on or before its importation (bringing into India)/warehouse of the goods. Also, it is argued that the principle of law laid down by the Hon ble Supreme Court in Mihir Textile Ltd. s case(supra) has been mis-quoted and not understood in its proper perspective, hence misapplied to the facts and circumstances of the present case. To substantiate their argument, the appellant have re .....

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ATIONS, 1965 [Notification No. 183-Cus., dated 18-11-1965 as amended by Notifications No.71-Cus., dated 30-4-1966; No. 117-Cus., dated 18-6-1966; No. 101-Cus., dated5-7-1966; No. 56-Cus., dated 27-6-1970 and No. 282-Cus., dated 2-8-1976.] In exercise of the powers conferred by Section 157 of the Customs Act, 1962 (52 of 1962), read with the proviso to the entry in Column 2 against Item 72A (i) of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934), the Central Board of Excise and Cust .....

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Every importer claiming assess-, ment of the articles falling under sub-heading No. (i) or sub-heading No. (ii) of the said HeadingNo.84.66 on the importation shall apply in writing to the proper officer of Customs at the port where the goods are to be imported for registration of the contract or contracts, as the case may be: 84.66 (i) (ii) Provided these are imported (whether in one or in more than one consignment) against one or more specific contracts, which have been registered with the ap .....

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amended. In exercise of the powers conferred by section 157 of the Customs Act, 1962 (52 of 1962), and in supersession of the Project Imports (Registration of Contract) Regulations, 1965, except as respect things done or omitted to be done before such supersession, the Central Board of Excise and Customs hereby makes the following regulations, namely : REGULATION 1.?Short title and commencement. (1) These regulations may be called the Project Imports Regulations, 1986. (2) They shall come into f .....

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ore specific contracts, which have been registered with the appropriate Custom House in the manner specified in regulation 5 and such contract or contracts has or have been so registered, (i) before any order is made by the proper officer of customs permitting the clearance of the goods for home consumption; (ii) in the case of goods cleared for home consumption without payment of duty subject to re-export in respect of fairs, exhibitions, demonstrations, seminars, congresses and conferences, du .....

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5.4. On a simple reading of the aforesaid provisions under both the Regulations in juxtaposition, it is clear that under the old regulations, read with erstwhile Tariff entry 84.66,the contract should be registered before permitting clearance of the goods for home consumption by the Customs officer or before depositing the items in a warehouse; however under the new Regulation, the condition of deposit in warehouse is conspicuously absent. It is the argument of the appellant that the legislator .....

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registered before any order is made by the proper officer of Customs permitting the clearance of the goods for home consumption. The procedure/guideline for project import assessment has been enumerated by the CBEC in Chapter 5 of Customs Manual at para 3.1 as: 3. Registration of contracts: 3.1 In terms of Regulation 4 of the Project Import Regulations, 1986 (PIR) the basic requirement for availing the benefit of assessment under Tariff Heading No. 98.01 is that the importer should have entered .....

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the goods for home consumption i.e when it leaves the customs barrier. Needless to mention, clearance of goods for home consumption as mentioned in Regulation (4) of PIR,1986 cannot be construed as crossing of the Indian territorial waters and depositing it in the warehouse. Unhesitatingly, it could be said that the clearance of the goods is for home consumption i.e. when the goods move out of the customs control so as to mix with the mass of goods for consumption. 5.7 These regulations had been .....

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Customs, Mysore that Coal India Ltd. had placed purchase order on the assessee-importer for supply of BH-85 and BH-35 Dumpers and for the manufacture of the said dumpers they were required to import substantial quantity of components to be used in certain identical projects and that the import of the quantity of components would qualify for concessional rate of Duty of Customs under Customs Tariff Sub-Heading9801.00 and they are eligible to Project Import Assessment. After analyzing the Regulat .....

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er chapter heading 84.66 which clearly laid down that the registration of contract has to be done before clearance of goods for home consumption or before the deposit in the warehouse. This restriction is absent in Regulation 4 & 5 of the present Regulations and in Chapter Heading 98.01. The Regulation 4 specifically omits a reference to the condition regarding registration being done before depositing in a warehouse and only states that it has to be done before clearance for home consumptio .....

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ent. The appellants succeed in this appeal and the same is allowed by consequential relief, if any. 5.8We find that the ld. Adjudicating Authority has placed strong reliance on the decision of the Hon ble Supreme Court in Mihir Textiles Ltd. s case (supra) while denying the benefit of Project Import benefit to the Appellant. The ld. Commissioner has observed that the Hon ble Supreme Court has laid down three conditions that are necessary to be satisfied for extending the benefit. At para 4 of th .....

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d (3) Registration of the contract should have been obtained before the order for warehousing has been passed. The Hon ble Supreme Court further held that unless all these three conditions are satisfied, no importer can claim, as a matter of right, the concessional relief provided in the entry in the present case, where the goods imported and the Bills of Entry were filed, the contract was not registered. 5.9 The ld. Sr. Advocate has vehemently argued that the Condition No.(3) as stated in the s .....

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plied to the Collector of Customs for granting registration of the contract as envisaged in Entry84.66 of Customs Tariff and got the registration on 22.4.1983. Consequently, the appellant had filed a refund application on the ground that they were liable to pay Customs Duty only at the concessional rate shown in the aforesaid Entry. The claim for refund was rejected by the Authorities and confirmed by the Tribunal. After discussing the provisions, as was in existence during the relevant point of .....

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ld have been obtained before the order (granting permission for clearance of the goods) was passed. Unless all the three conditions are satisfied, no importer can claim, as a matter of right, the concessional relief provided in the entry. In these cases the contracts were not registered at all before the order of clearance was passed. That fact is not disputed before us and as the appellants were aware of position they chose to pay full customs duty for making the clearance. 5.11 We find that in .....

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