2018 (11) TMI 1165 - AT - Customs

Tribunal confirms water purification system qualifies for customs tariff exemption

Commissioner of Customs (Imports), Chennai Versus M/s. Bharat Heavy Electricals Ltd.

The Tribunal upheld the Commissioner (Appeals) decision regarding the classification of imported goods under Customs Tariff Heading 9801 as a project for ... Classification of imported goods - Filters - goods imported under project import - Registration of a Contract under ‘Project Import’ for online self clearing filters for drinking water as an ‘Initial Setup’ - Revenue was of the further view that the proposed import being a single/composite machine for the purpose of purification of water, could not be classified as a “project” under Customs Tariff Heading 9801 - The learned Commissioner vide Order-in-Appeal dt. 23.08.2011 set aside the order of the lower authority thereby allowing the appeal directing granting of Registration as sought. Held that:- The observations of the learned Commissioner (Appeals) is apt and is also in tune with the CBEC Circular No. 659 - the water purification system itself could ideally be considered as a unit as explained in Regulation 3(d). The water purification system itself could ideally be considered as a unit as explained in Regulation 3(d) - The Circular No. 659 also supports the contentions of the assessee by which the water treatment projects would get exempted. The assessee having satisfied the conditions of the said Circular, the Commissioner (Appeals) has rightly extended the benefit of the Circular to the assessee. Appeal dismissed - decided against appellant. Issues: Classification of imported goods under Customs Tariff Heading 9801 as a project or not.Analysis:1. The appellant Revenue challenged the classification of goods imported by the assessee under 'Project Import' for online self-clearing filters for drinking water as an 'Initial Setup.' The Revenue argued that the proposed import did not qualify as a project under Customs Tariff Heading 9801 as it was considered a single/composite machine for water purification, not for setting up or expanding a unit. The Deputy Commissioner rejected the application, but the Commissioner of Customs (Appeals) overturned this decision, citing different entries in the Customs Tariff Heading for industrial and other projects. The Revenue appealed to the Tribunal.2. The Revenue contended that the imported filter was not sufficient to be classified as a project under Customs Tariff Heading 9801, as per the Project Import Regulation, 1986. They argued that a single/composite machine for water purification did not constitute a project. The Revenue also disputed the applicability of a Board Circular granting concessions for water treatment plants, stating that importing a single machine was not equivalent to an initial setup.3. The respondent's advocate supported the Commissioner (Appeals) findings, arguing that the water purification plant was wrongly classified as an industrial plant. It was contended that the plant should be considered a drinking water supply project, supported by the authority of the District Collector. The advocate emphasized that the imported goods were for the initial setup of a drinking water supply project, meeting the definition of a 'unit' under Regulation 3(d).4. The Tribunal reviewed the submissions and evidence, finding that the Commissioner (Appeals) decision aligned with the CBEC Circular No. 659. The water purification system could be considered a unit as per Regulation 3(d), and the Circular supported the exemption for water treatment projects. The Tribunal endorsed the Commissioner (Appeals) reasoning, noting that the ultimate objective was to exempt water treatment projects for human and animal consumption, which was undisputed by the Revenue. Consequently, the Tribunal upheld the Commissioner (Appeals) decision and dismissed the appeal.In conclusion, the Tribunal affirmed the classification of the imported goods under Customs Tariff Heading 9801 as a project for a drinking water supply project, in line with the CBEC Circular and the definition of a 'unit' under Regulation 3(d).