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TMI Blog2008 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... nt states that it proposes to set up a "1200 MW green field integrated coal fired power plant" which would include (a) captive coal mine, (b) dedicated coal transportation facility and (c) dedicated water intake and pumping system and (d) dedicated power evacuation system. 2. The applicant submits that the four items mentioned above are integral to the generation of electricity through the proposed project. In order to implement the project, the applicant will have to import appliances, equipments, machinery, coal mining equipment, control gear and transmission equipment and components. The applicant states that it is in the process of obtaining all necessary authorizations and permissions required by law. The applicant points out that in the latest draft of the Implementation Agreement, the term 'project' has been defined to mean 'the thermal power station alongwith the captive coal mine, associated water pipelines, fuel transportation system and transmission facilities." . The applicant gives his comments in detail as to how all the five items constitute an integrated power project to be undertaken by the applicant. The illustrative list of the goods to be imported for the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (i)fertilizer projects;. 5% 10% (ii) Coal mining projects 5% 10% - (iii) (omitted) (iv) power generation projects including gas turbine projects(excluding captive power plants…….) 5% 10% - (v)barge mounted power plants 5% - - (vi)Power transmission, sub-transmission or distribution projects 5% 10% - Whether or not the applicant is eligible to import goods for the purposes of the captive coal mine, the dedicated coal transportation system, the dedicated water transportation system and the dedicated power evacuation system under the proposed project under a complete customs duty exemption under entry 400 of Notification 21/2002-Cus, or a concessional rate of customs duty under Entry 399 of Notification 21/2002-Cus? 3.1 In view of the letter dated 11/9/2008 filed by the applicant, the Ruling on the second part of the question relating to Entry 399 need not be given. The letter filed by the authorized representative reads as follows: "Pursuant to the above instruction, the Applicant seeks to humbly subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsportation System: The Water Resources Department of the Government of Chhatisgarh has allocated to the applicant certain quantity of water to be drawn from River Mahanadi for usage in the proposed project. The applicant states that it will build, operate and maintain a system of adequate capacity for transporting, storage and handling of water required for the project. The distance between the source of water and the power plant site is roughly 110 kms. Water transportation system would involve laying pipelines, pumping and storage. (iv) Power Evacuation System: The applicant states that as per MOU with State of Chhattisgarh, it is obliged to supply 7.5 per cent of the total capacity of the proposed power plant to the State at fuel prices and the applicant can sell the balance output to any other customer. The entities like the applicant who intend to sell power to various utilities and consumers need to coordinate with Power Grid Corporation for evacuating the power generated in the power plant and for the subsequent transmission of such power to the intended recipients. The power Grid Corporation of India Ltd which is a Government of India Undertaking, is a Central Transm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent will be against the law because the notification issued by the Central Government should be in conformity with the policy/guidelines formulated by it. Such policy/guidelines which has the approval of the Cabinet cannot be bypassed by restricting the scope of exemption. 5.1 It is also contended that even the word 'plant' by itself bears a wide meaning and anything that is necessary for the running of the plant should be regarded as a component of power plant. In any case, it is submitted that the equipment required for the four adjuncts of the power plant (set out supra) shall be regarded as 'auxiliary equipment' and therefore qualify for concessional duty under Tariff item No.9801. It is also contended that the expression 'coal mining project' occurring in Entry 399 (ii) is not an integrated or dedicated coal mine and therefore the goods required for making the coal mine operational for the specific purpose of running the power plant are covered by Entry 400. 6. It is the contention of the Revenue that only the goods imported for the purpose of thermal power plant of the capacity of 1000 MW or more will fall in Entry 400 of Notification 21/2002-Cus, subject to the fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this category". In the policy which has been recast in 1998, it was decided that inter-state and inter-regional mega power projects were to be set up both in the public and private sectors. The re-organization of the public sector power corporations was also envisaged by the policy. The policy contemplates the beneficiary States constituting Regulatory Commissions with powers to fix tariff. Paragraph 5 of the guidelines is important. It says "the import of capital equipment would be free of custom duty for these projects". In order to ensure that domestic bidders were not adversely affected, certain safeguards were spelt out. 7.2 Entry / Sl.No. 288A of Ch. 98.01 inserted by Notification No. 63/1999 substantially gives effect to the 1995 policy read with revised policy of 1998. The same concept of mega power project is to be found in that Entry. The Entry reads : Sl * . No. Chapter/ heading/ sub-head no. Description of goods Standard Rate Additional Duty rate Condition No. 288A 9801 Goods required for setting up of any Mega Power Project specified in List 33, if such Mega Power Project is - (a) an interstate thermal power plant of a capacity of 1500MW or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son of the policy decision taken by the Government as reflected in the Union budget speech of 2003-04. The following extract from the budget speech is relevant : "Simultaneous to the emphasis on improvement in power distribution, our attention on capacity addition remains. The Government had earlier, in 1999, notified 18 power projects as mega projects, conferring upon them various duty and licensing benefits. The Government now proposes to liberalise the mega power project policy further by extending all these benefits to any power project that fulfills the conditions already prescribed for mega power projects." Pursuant to the above policy, Notification No.26/2003-Cus. was issued amending the notification no.21/2002-Cus. Entry 400 as amended reads: 400. 9801 Goods required for setting up of any Mega Power Project, that is to say- Nil Nil 86 (a) an inter-State thermal power plant of a capacity of 1000 MW or more; or (b) an inter-State hydel power plant of a capacity of 500 MW or more, as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power 7.7 The am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular premises, the question will arise whether it takes within its fold even the 'dedicated' coal mine and coal/water transportation systems. That question can be approached from the angle of the general concept of Power Project and its amplitude. However, without delving the issue from a general perspective, the answer could be found on having an insight into the setting and language of the Entry itself. As rightly pointed out by the Commissioner as well as the departmental representative, the expression 'that is to say' is very significant. What exactly is the type of mega power project that is contemplated by Entry 400 is amplified and put in specific terms by employing the phrase, 'that is to say', followed by specific description of project. 8.2 The meaning and implication of the phrase 'that is to say' can best be understood by referring to the four judge Bench decision of the Supreme Court in State of Tamil Nadu vs. Pyare Lal Malhotra 1983 (13) ELT 1582, AIR 1983,. That case arose under Central Sales-tax Act. The interpretation of the item "Iron and steel" occurring in section 14(iv) of the Central Sales-tax Act came up for consideration. Iron and steel are amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was apparently meant to exhaustively enumerate the kinds of goods on a given list". 8.3 The underlined proposition in the above passage as well as the last observation applies in all fours to the case on hand. In Entry 400, what follows after the words 'that is to say" are not illustrative instances but they are exhaustive of 'mega power project'. What is sought to be achieved by introducing the expression 'that is to say' in the year 2003 was to fix the meaning of the opening clause of the Entry in specific and clear terms. The expression 'mega power project' was evidently borrowed from the power policy statement and the definition thereof as given in the policy was adopted in the Customs notification. The introduction of ancillary clause, "that is to say", after the expression 'mega power project' became necessary when the net of exemption was widened in 2003 so as to include not merely listed power projects but also other specified categories of power projects - both in public and private sector. Thus, the object, the context and the language of the Entry - all point out in one direction that the mega power project should conform to and be restricted to the specific descripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has received authoritative judicial interpretation by the time the Entry was introduced. 9. In the light of the above discussion, we cannot uphold the contention of the applicant that the power plant specified is only one facet of power project and the other allied facets viz. coal mine, coal transportation, water pumping/transportation systems are also comprehended within the scope of Entry 400. Such an interpretation would go against the language employed and unduly widen the scope of Entry. 10. In an apparent bid to get over the difficulty in interpretation especially by reason of usage of the crucial phrase, 'that is to say', the learned counsel for the applicant has advanced an argument that irrespective of what is contained in notification No. 21/2002-Cus, the applicant derives the benefit of duty relief from the power policy announced by the Central Government with the approval of the Council of Ministers. In other words, it is his contention that the notification issued under the Customs Act should fall in line with the said power policy. Otherwise, the notification will be pro tanto illegal. Therefore, the counsel for the applicant submits that in accordance with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials. The High Court allowed the writ-petition filed by the respondent for quashing the notification dated 4.4.1994 in so far as it denied the benefit of exemption to the old industrial units as it was opposed to the industrial policy decision of the State Government. The Judgment of the High Court was affirmed by the Supreme Court. The Supreme Court observed thus: "Coming to the second question, namely the issuance of notification by the State Government in exercise of power Under Section 7 of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the Incentive Policy itself. The Industrial Incentive Policy is issued by the State Government after such Policy is approved by the Cabinet itself. The issuance of the notification Under Section 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of 1995 spelling out the policy, it is noted in the Preamble : "Setting up of power plants of capacity of 1000 MW or more….". In the 1998 revised policy guidelines, it was stated in the opening para : "guidelines for setting up of mega power projects of capacity 1000 MW or more…. were issued in 1995". Thus, no dichotomy was ever maintained between these two terms. A statutory notification cannot be construed, much less invalidated on the basis of fragile deductions and subtle inferences drawn from an executive policy. An unambiguous, specific and categorical policy statement of the Government is a pre-requisite for its legal enforceability. Suprabhat Steel was one such case. 11. Reliance was placed by the learned counsel for the applicant on the decision of the Supreme Court in Kerala State Electricity Board vs. Collector of Customs 2000 (117) ELT 531 (S.C.). In that case, the appellant KSEB imported certain equipment for setting up new sub-stations to improve its transmission and distribution network. The claim of the appellant that the imported goods were covered by Tariff heading 98.01 was negatived by the Tribunal. All items of machinery including apparatus and transmission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held : "The learned senior counsel for the appellant is right in submitting that power project could not have meant 'power plant' also and the scope for confusion or doubts, if any, was done away with by inserting a clarification". Far from supporting the contention of the applicant, the decision perhaps militates against its stand. Having regard to the context in which the expression 'power project' was used, their Lordships came to the conclusion that it did not include a power plant unconnected with public distribution. A small power plant meant for generation of electricity for internal consumption was held to be not a 'power project' within the contemplation of the notification. This decision is not an authority for the proposition that all power generating units the end product of which is power (meant for distribution) should necessarily be classified as power projects and they cannot be treated as power plants, notwithstanding the language of the Entry. In any case, it is not the ratio of the decision that power project should include the infrastructure for the supply and transportation of raw material etc. 13. Reliance was then placed by the applicant's counsel on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Hotel(1971) 82 ITR 44 , the Supreme Court held that sanitary and pipeline fittings installed in a hotel fell within the definition of the term 'plant' under the old Income-tax Act. The following are the relevant observations : "To have sanitary fittings, etc., in a bathroom is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. If the partitions in Jarrold's case [1962] 40 TC 681 (CA), could be treated as having been used for the purpose of the business of the trader, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier. He can reasonably expect to get more custom and earn larger profits by charging higher rates for the use of rooms if the bathrooms have sanitary fittings and similar amenities. We are unable to see how the sanitary fittings in the bathrooms in a hotel will not be 'plant' within section 10(2)(vib) read with section 10(5) when it is quite clear that the intention of the Legislature was to give it a wide meaning and that is why articles like books and surgical instruments were expressly included in the definition of 'plant'." 14.1 The follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Mumbai vs. Toyo Engineering India Ltd. (2006) 201 (ELT) 513 and Commissioner of CE vs. Paradeep Phosphates Ltd. (2006) 200 ELT 515 to elucidate the meaning of the expression 'auxiliary equipment'. 15.2 This contention is based on a wrong premise that the auxiliary equipment etc. covered by tariff item 9801 should be transplanted into Entry 400 of exemption notification no.21/2002. As already noted, the Entry 400 refers to mega power project, that is to say, an inter-state power plant of 1000 MW or more and it is in relation to the goods required for such power plant that the exemption is granted. Once it is held that the goods required for dedicated coal mine, coal and water transportation systems cannot be brought within the ambit of Entry 400, we do not see any relevancy in the argument based on the ambit of the expression 'auxiliary equipment' occurring in tariff item 9801. 16. In view of the foregoing discussion, the interpretation sought to be placed by the applicant on Entry 400 of the Customs Notfn.21 of 2002 does not merit acceptance. The equipment for 'dedicated' coal mine and transportation of coal from the mine to the production unit and the water in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating plants (vide s.2(32) of the Electricity Act). Inter-state transmission system includes any system for the continuance of electricity by means of main transmission line from the territory of one state to another etc. (vide s.2(36) ). The Power Grid Corporation is a 'Central Transmission Utility' as per section 38(1) of the Electricity Act, 2003. The functions of the Central Transmission Utility are laid down in sub section (2) of section 38. They are : (a) to undertake transmission of electricity through inter-State transmission system; (b) to discharge all functions of planning and co-ordination relating to inter-state transmission system with State Transmission Utilities, Central and State Governments, generating companies, licensees etc.; (c) to ensure development of an efficient, co-ordinated and economical system of inter-State transmission lines for smooth flow of electricity from generating stations to the load centres; (d)…….]. The applicant is authorized to install transmission lines and other apparatus only to facilitate the transmission of power to the power grid so that it could be made available to the inter-state customers who buy power from the applicant. Otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh vs. NTPC Ltd . The Constitution Bench of the Supreme Court observed thus : "However, A.N. Grover, J. speaking for three-Judge Bench of this Court went on to observe that electric energy "can be transmitted, transferred, delivered, stored, possessed etc. in the same way as any other moveable property". In this observation we agree with Grover, J. on all other characteristics of electric energy except that it can be 'stored' and to the extent that electric energy can be 'stored', the observation must be held to be erroneous or by oversight. The science and technology till this day have not been able to evolve any methodology by which electric energy can be preserved or stored." {emphasis supplied} 18.1 The applicant has also referred to the observations to the similar effect in Indian Aluminum Co. vs. State of Kerala AIR 2002 SC 1895. The applicant has also drawn our attention to the decision of the Appellate Tribunal for Electricity in the case of Gajendra Haldea vs. Grid Corporation of Orissa Ltd. (1996) 7 SCC 637 , wherein it was observed thus : "Thus it is clear that in view of the peculiar nature of electricity, its generation, sale, supply and consumption take place wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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