2013 (9) TMI 103 - AT - Customs

Interpretation of Customs Notification on Refinery Goods Duty Rate Extension

RELIANCE INDUSTRIES LIMITED Versus COMMISSIONER OF CUSTOMS, JAMNAGAR

The case involved the interpretation of Notification No. 21/2002-Cus concerning the concessional rate of duty for goods related to a petroleum refinery. ... Benefit of Notification No. 21/2002 - Assesse setup Petroleum Refinery and imported mobile cranes and claim concessional rate of duty under Notification No. 21/2002 – The Revenue had denied the benefit of the Notification that the cranes do not stand specifically covered under any of the entries in list 17 - On the other hand the appellants had staked their claim under entries 44 & 45 - Held that:- Keeping in view the various entries of the Notification and the long list of goods specified and the purport and object Notification seeks to achieve - the restrictive meaning given by the authorities below can not be upheld – order set aside – Relying upon Commissioner of Customs (Preventive), Gujarat v. Reliance Petroleum Limited [2008 (5) TMI 13 - SUPREME COURT] - the object of grant of Notification shall be considered in a broad based manner. The words used therein have to be given its natural meaning, the purpose must be allowed to be achieved. The words “all types of materials” should be construed widely. It was not only the items imported for initial setting up of Refinery, which had to be extended the benefit of the Notification but the goods required for running and maintenance of the refinery would also get covered - The purpose for which the exemption was granted must be considered in its entirety - The purpose of grant for exemption cannot be lost sight of - The Central Government must be held to be aware if not for the equipment itself but about the nature which would be required for setting up a Crude Oil Refinery - an exemption Notification should be construed directly but it was also well settled that interpretation of an exemption Notification would depend upon the nature and extent thereof - The terminologies used in the Notification would have an important role to play. Where the exemption Notification ex facie applies, there was no reason as to why the purport thereof would be limited by giving a strict construction thereto – Decided in favor of assesse. Dissenting opinion – Member (Technical) was of the opposing view and delivered the separate judgement – but the Third Member was of the opinion as to the Member (Judicial) – Thus majority Decision was into the favor of assesse. Issues Involved:1. Interpretation of Notification No. 21/2002-Cus, specifically Serial No. 228.2. Whether the benefit of the notification extends to goods required for running, repair, and maintenance of the refinery.3. Whether the entries Nos. 44 & 45 of list 17 become meaningless if a strict interpretation is applied to Serial No. 228.4. Whether the terms running, repair, and maintenance are restricted only till the setting up of the refinery.Issue-wise Detailed Analysis:1. Interpretation of Notification No. 21/2002-Cus, specifically Serial No. 228:The appellant imported mobile crawler cranes for a petroleum refinery and claimed a concessional rate of duty under Notification No. 21/2002-Cus. The authorities denied this claim, leading to a confirmation of differential duty. The dispute centered on whether the cranes fell under the goods specified in List 17 required for setting up a crude petroleum refinery as per Serial No. 228 of the notification.2. Whether the benefit of the notification extends to goods required for running, repair, and maintenance of the refinery:The appellant argued that the benefit should extend to items required for running, repairing, and maintenance, citing Entries 44 and 45 of List 17. They contended that the term 'setting-up' should not be limited to the initial phase but should include ongoing processes necessary for the refinery's operation. The Revenue countered that the concessional rate applies only to goods needed for the initial setting up of the refinery.3. Whether the entries Nos. 44 & 45 of list 17 become meaningless if a strict interpretation is applied to Serial No. 228:The tribunal considered that a strict interpretation of Serial No. 228 would render Entries 44 and 45 meaningless. These entries specifically provide exemptions for special maintenance systems and items used for running, repairing, or maintenance of the refinery. The tribunal emphasized that an interpretation rendering part of the notification meaningless should be avoided.4. Whether the terms running, repair, and maintenance are restricted only till the setting up of the refinery:The tribunal noted that the terms running, repair, and maintenance refer to continuous activities that cannot be restricted to the initial setting up of the refinery. The tribunal cited the Supreme Court's interpretation in similar cases, suggesting that the term 'for setting up' should be read as 'intended for setting up,' thus covering items used in the refinery's ongoing operation.Separate Judgments:Judgment by Member (Judicial):The Member (Judicial) concluded that the benefit of the notification extends to goods required for running, repair, and maintenance of the refinery. They argued that a harmonious construction of the notification and the entries in List 17 supports this interpretation. The Member (Judicial) relied on various legal precedents and the Supreme Court's interpretation to support their view.Judgment by Member (Technical):The Member (Technical) disagreed, stating that the exemption under Serial No. 228 applies only to goods required for the initial setting up of the refinery. They argued that once the refinery is set up, the benefit cannot be extended to goods imported for maintenance or repair. The Member (Technical) cited legal principles of strict interpretation of exemption notifications to support their view.Final Decision:The matter was referred to a third Member (Judicial) due to the difference of opinion. The third Member concurred with the Member (Judicial), holding that the benefit of the notification extends to goods required for running, repair, and maintenance of the refinery. This interpretation avoids rendering Entries 44 and 45 meaningless and aligns with the broader purpose of the notification.Conclusion:In view of the majority decision, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.