Customs exemption for caustic soda plant expansion upheld where evaporation and flaking machinery formed integral production stages.

Notification No. 12/2012-Cus. was construed as covering not only modernization but also capacity expansion of an existing caustic soda unit using Membrane Cell Technology, so the exemption could apply to imported machinery used in that process. Evaporation and flaking were treated as integral stages in caustic soda production and in increasing concentration under the technology adopted, so the imported evaporation plant and flaking unit were held eligible for concessional basic customs duty.

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Issues: Whether the imported evaporation plant and flaking unit were eligible for concessional basic customs duty under Notification No. 12/2012-Cus. dated 17.03.2013 as machinery for modernization or capacity expansion of an existing caustic soda unit using Membrane Cell Technology.

Analysis: The scope of the notification was not confined to modernization alone but also extended to capacity expansion of an existing caustic soda unit. On the record, evaporation and flaking were found to be integral stages in the production of caustic soda and part of the process of increasing concentration by adopting Membrane Cell Technology. The adjudicating authority had focused only on the modernization limb and had overlooked the capacity expansion limb of the notification. The reasoning of the appellate authority that the imported machinery fell within the notified benefit was found to be correct.

Conclusion: The imported goods were eligible for the concessional rate of basic customs duty, and the Revenue's appeal failed.

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