TMI Blog2008 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 - AAR/08/Cus/2008 - Dated:- 19-12-2008 - Mr. Justice P. V. Reddi (Chairperson), Mr. A.Sinha (Member), Mrs. Chitra Saha, (Member) Present for the Applicant - Mr. S. Ganesh, Sr. Counsel Mr. Sujit Ghosh - BMR Associates Mr. Sudipta Bhattacharjee BMR Associates Mr. Aditya Bhagat } Applicant's Mr. Ritesh Nimani} officials Present for the Commissioner - Ms. A. P. Tiwari, Jt. CDR concerned Mr. Sumit Kumar, SDR RULING (By Chairperson) - This is an application for advance ruling under section 28E of the Customs Act, 1962. The applicant ( AESC for short), which is a company incorporated in India, is a wholly owned subsidiary of the foreign company - AES India Holdings (Mauritius). In March, 2006 AES India (Pvt.) Ltd. signed a Memorandum of Understanding with the State Government of Chhattisgarh to develop 1200 MW power plant with an integrated coal mine in that State. Subsequently, the applicant, AESC, was incorporated in India in order to develop the power project. The applicant 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) dedic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interstate hydel power plant of a capacity of 350MW or more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura; or (d) an interstate hydel power plant of a capacity of 500MW or more, located in States other than those specified in clause (c) above We are concerned here with clause (b) of the above Table. 2.2 The immediately preceding Entry is also relevant. The material portion thereof is extracted below: 2.3 Notification No. 21/2002-Cus was issued by the Central Government in exercise of the powers conferred by Section 25(1) of the Customs Act, 1962. The notification exempts wholly or partially the duty of customs or additional duty leviable on the goods specified in First Schedule to the Customs Tariff Act, 1975. 3. The following question is framed by the applicant for the purpose of seeking advance ruling : Sl. No. Chapter/ Heading/ sub- heading no. Description of goods Standard rate Additional Duty rate Condition No. 399 9801 Goods required for - - (i)fer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that all these facilities/systems are necessary for establishing coal based power project and the scope of the relevant entry in the Notification (No. 400) ought not to be confined only to the power plant proper. 4. We shall advert briefly to the relevant facts set out by the applicant with reference to each of the four items in order to consider the applicant's contention. (I) Captive Coal Mine The Department of Coal, Government of India, has allotted Coal Block field of Chihttisgarh specifically to meet the requirement of the proposed power plant. The distance between the power plant site and the coal mine is 20 to 25 kms. The applicant submits that as per the provision of Coal mine Nationalization Act, 1973, coal mining can be undertaken by private sector companies only for certain specified purposes which includes generation of power. The coal will have to be used exclusively as fuel in the power plant. (ii) Coal Transportation System Coal from the captive coal mine will have to be transported to the power plant site through a conveyer system or a dedicated road. The coal transported from the mine will be received in the inplant coal handling system whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning so as to cover not merely the power plant from where the electricity is generated but also the other key features such as dedicated coal mine etc. integrally connected to the functioning of the power plant. The expression 'project' is word of wide import and the use of expression 'plant' in the latter part of the Entry is not intended to cut down the amplitude of the phrase 'mega power project'. Project and plant, it is pointed out are synonymous in the context and the word 'power plant' is used only to specify the capacity, but not to exclude other integral features associated with power plant. The scope of exemption cannot be whittled down to the goods required for the actual power plant. The notification which contains both the expressions 'power project' and 'power plant' must be read as a whole in keeping with the objective behind the exemption as apparent from the power policy of the Central Government. In that sense, the goods required for the project as a whole with all the requisite infrastructure, viz coal mine, water pumping and power evacuation systems should also qualify for exemption. If the notification cannot be so interpreted as to cover the other key element ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not the Policy statements of 1995 and 1998. Certain definitions in the Electricity Act, 2003 are also referred to. 7. Now, we shall analyse and interpret Entry 400 of Notification 21/2002-Cus.(as amended) under which the applicant claims to seek the benefit. To appreciate the applicant's contentions, it is also necessary to trace the evolution of this Entry. 7.1 The Entry corresponding to the present Entry was introduced for the first time in 1999. As pointed out by the learned Sr. counsel for the applicant, the introduction of this Entry in the Customs notification seems to be a follow up to the policy decision taken by the Central Government as set out in the communication dt. 10-11-1995 addressed by the Secretary, Ministry of Power, Government of India and the revised policy/guidelines relating to Mega power projects issued in 1998. The policy formulated in 1995 was in relation to the "setting up of power plants of capacity of 1000 MW or more supplying power to more than one state". In that policy document, it is stated that the "project of capacity of 1000 MW and more and catering power to more than one state should be considered as a mega project. Projects which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Executive Officer of such project." 7.3 List 33 specifies by name the thermal projects and hydel projects in respect of which exemption is made applicable. Then, under Customs Notfn.No.100 of 99 dated 28/7/99, the capacity of thermal power project specified in the earlier notification was altered from 1500 to 1000 MW. As a result of this notification, 7 more thermal projects were added to the list. 7.4 Then, the next notifications in succession are Customs Notfn.No.16 of 2000 and 17 of 2001 which are substantially the same excepting that the number of thermal and hydel projects specified in List 33 has gone down. 7.5 Then comes the Customs Notfn.No.21 of 2002 dated 1.3.2002 which is material for our purpose. It reads as follows : 7.6 Entry 400 was amended by the Notfn.No.26/2003. The said Sl. No. Chapter/ heading/ sub-head no. Description of goods Standard Rate Additional Duty rate Condition No. 400 9801 Goods required for setting up of any Mega Power Project specified in List 42, if such Mega Power Project is - (a) an interstate thermal power plant of a capacity of 1000M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1999 followed by similar but wider entries in successive years? This has been spelt out in specific terms by the second part of the Entry preceded by the expression, "that is to say". That expression has been advisedly employed to specify the type and potential of mega power project within the contemplation of the Government. The phrase, 'that is say," is intended to specify and delineate the parameters of a mega power project that qualifies for the duty relief. Three types of power plants are specified immediately following 'that is to say'. The three characteristics that are laid down in clause (b) of Entry 400 are (i) it must be a thermal power plant, (ii) of the capacity of 1000 MW or more and (iii) it must be located in the States other than those mentioned in clause (a). The specification of these criteria in the latter part of Entry 400, prefaced by the expression 'that is to say' fall in line with the power policy statement/guidelines of 1995 read with the policy recast in 1998. As explained later, the notification issued under the Customs Act is in conformity with those guidelines. The same pattern of identifying the particular types of power projects which needed incen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish it; (3) but where the principal clause is general in terms it may restrict it: See this explained with many examples, Stukeley v. Butler, Hob. 171." The Supreme Court then observed: "the quotation given above, from Stroud's Judicial Dictionary shows that, the expression "that is to say" is employed to make clear and fix the meaning of what is to be explained or defined. Such words are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word "includes" is generally employed. In unusual cases, depending upon the context of the words "that is to say" this expression may be followed by illustrative instances. In Megh Raj v. Allah Rakhia, the words "that is to say", with reference to a general category "land" were held to introduce, "the most general concept" when followed, inter alia, by the words "rights in or over land". We think that the precise meaning of the words "that is to say" must vary with the context. Whereas in Megh Raj's case, the amplitude of legislative power to enact provisions with regard to "land" and rights over it was meant to be indicated, the expression was given a wide scope because it came after the word "la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.5 There is another angle from which the problem can be looked at. Goods required for coal mining project are covered by Entry no. 399 of the same notification no. 21/2002-Cus. According to the counsel for the applicant, the Entry 399 governs a stand-alone coal mine which is not an adjunct to the power plant. This contention overlooks the fact that if the Government wanted to extend the benefit under Entry 400 to the associated coal mine, express words would have been employed in the notification. Such an important item as coal mine equipment would not have been left uncovered, if it was intended to give the benefit to the so-called dedicated coal mine. We are saying this especially for the reason that the previous Entry i.e. 399 deals with goods required for coal mining project explicitly. That being so, if the Central Government wanted to draw a distinction between a stand alone coal mine and a dedicated coal mine, that should have been reflected in express language. A cloud of doubt could not have been allowed to disguise such an important aspect. The learned Sr. Counsel for the applicant submitted that the real reason for specifying the power plant in the second part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mega power project as a whole but not merely for the power plant proper. This argument, in our view, is based on a wrong premise that the notification does not give effect to the policy. We have already adverted to this aspect earlier while analyzing the notification. However, at the risk of repetition, we shall deal with this point in some more detail. 10.2 The learned counsel for the applicant drew support for this argument on the decision of the Supreme Court in State of Bihar vs. Suprabhat Steel Limited (1999) 1 SCC 39. We are of the considered view that the decision in Suprabhat Steel does not lend support to the contention of the applicant. The dicta in the said judgment should be understood in the light of the industrial policy considered therein coupled with the fact situation. In that case, their lordships were dealing with the exemption notification issued under section 7 of Bihar Finance Act. The Industrial policy resolution of 1993 published by the State Government, while announcing sales-tax exemption on the purchase of raw material, laid down that the old industrial units whose investment on plant and machinery did not exceed Rs.15 crores on 1.4.1993 shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a notification in exercise of power under section 7 of the Bihar Finance Act which may override the incentive policy itself". We do not think that the ratio of the said decision can be applied to the present case. The clear terms of the industrial policy resolution in that case makes all the difference. It did not differentiate the old and new industrial units. The new units were covered by cl(a) of para 10.4(i) and the old ones by cl(b). The only restriction in respect of old units was that the investment on machinery should not have exceeded Rs.15 crores by 1.4.1993. If that condition was fulfilled, the old units were entitled for the relief for a period of 7 years from 1.4.1993. The policy statement regarding grant of sales tax relief was thus clear and categorical. In the instant case, we cannot reach the conclusion that the notification issued under the Customs Act fails to give effect to the relief announced by the Central Government in its 1998 power policy guidelines or that it falls foul of the policy. Nowhere in the revised policy guidelines issued in 1998, it was stated that the customs duty exemption would be made available not merely to the power plant equipment b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project' without any qualifying words, the learned Judges held that it was broad enough to include the network for transmission and distribution also. Obviously, an unit transmitting and distributing power fell within the ambit of the broad expression 'power project'. The Entry/Tariff item with which we are concerned is very much different from the Entry interpreted by their Lordships. There is nothing in that judgment which warrants expansion of the term 'power project' even to the coal mine and the like on the ground that they are necessary adjuncts to the running of power plant. Apart from that, the Entry is cast in a different language so as to specify the particular types of power projects which are eligible to avail of duty relief. 12. The learned counsel for the applicant also drew our attention to the observations made by the Supreme Court in Union of India vs. Indian Charge Chrome 1994 (112) ELT 753. One of the questions considered therein was whether the Customs Notfn. No.133 of 85 which granted duty relief to the 'power projects' will include captive power plants. The notification was amended in the next year by adding an Explanation that power projects shall m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter was remanded to the Excise authority. It is pointed out that the receipt of inputs/capital goods in the factory is the criterion for the availment of credit under the aforesaid rules and therefore the principle stated in Vikram Cement will equally apply to the present case because the applicant too will be operating a 'dedicated' coal mine to secure the coal needed for the thermal power plant. We find this argument untenable. The nature and wording of the Cenvat/Modvat schemes are entirely different. The principle laid down by their Lordships in the two sentences quoted above cannot be extended by analogy to the interpretation of Entry 400 of Notfn. No.21 of 2002-Cus. There is nothing in the said Entry to indicate that the associated coal mine is treated as part and parcel of the power plant. If the expression 'mega power project' had stood alone without being qualified by "that is to say", the argument based on Vikram Cement case would have deserved serious consideration. 14. The learned Sr. counsel for the applicant made a further submission that the term 'power plant' is itself comprehensive enough to include the captive coal mine etc which are essential for running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that the expression 'plant' unlike 'project' bears a narrow connotation. In any case, in view of the vastly different nature of the provisions and the issues involved, the ratio in the above decisions cannot be applied to the question under consideration. We have no hesitation in rejecting this contention of the applicant. 15. The applicant has raised an 'alternative contention' based on Tariff item no. 9801 forming part of Chapter 98 of the First Schedule to the Customs Tariff. The "description of goods" in the said Tariff item in so far as it is relevant is as follows:- 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 aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified : (1) Industrial plant, (2) Irrigation project, (3) Power project, (4) Mining project, 15.1 It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said purpose fall within the ambit of Entry 400 of Customs Notfn.No.21 of 2002. This conclusion of ours is mainly based on the clear language of the Entry itself. The various power plants referred to in clause (a) to (d) are inter-state in nature. In clause (b) of Entry 400 with which we are concerned, the description given is "inter-state thermal power plant of a capacity of 1000 MW or more". That means the power plant must be designed in such a way that it delivers power to the customers of other states. It is not a power plant which merely caters to the requirements of the state in which it is located. The policy formulated in 1995 (referred to in paragraph 10 supra) has explicitly stated so. It was emphasized that projects which cater power to a single state, irrespective of the size of the power plant would not come under the category of mega power project. In the policy recast in 1998, it was again declared that setting up of interstate and inter-regional mega power projects in public and private sectors was the policy of the Govt. Accordingly, the expression 'inter-state power plant' finds its place in sl.no.288A of Notfn.No.63/99 and the corresponding entries in subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power Grid Corporation. Hence, whatever goods are required in connection therewith qualify for duty relief under Entry 400. 17.2 The learned Departmental Representative has referred to the definitions of 'generation station', 'electricity system' and 'electrical plant' under the Electricity Act 2003. None of them, in our view, have any bearing on the connotation of the expression 'inter-state power plant' - which is the expression used in Entry 400 of the Customs Notification. The meaning of that expression cannot be controlled by the terminology used in a later enactment dealing with a different subject. Certain special definitions are inserted therein for the purposes of that Act. We need not therefore embark on a discussion of the various definitions in the Electricity Act to find the meaning of the expression 'inter-state power plant' used in the Customs notification of 2002 and even earlier. 18. There is another aspect which has been highlighted by the applicant. It is pointed out that evacuation is an essential feature of a power generation plant as electricity cannot be stored. It is stated that the applicant is obliged to supply 7.5% of the total capacity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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