2022 (12) TMI 484 - AT - Customs

Tribunal rules in favor of appellant on Project Import Regulation, 1986 eligibility

Essar Power Gujarat Ltd Versus C.C. -Jamnagar (prev) (Vice-Versa)

The Tribunal held that the appellant was entitled to the benefit of the Project Import Regulation, 1986 (PIR, 1986), as long as the contract was ... Project import - contract is registered with the customs authorities after filing an into bond Bill of Entry but before filing of an ex-bond bills of entry for home consumption - Exemption from payment of custom duty - Mega Power Project - capital goods required for setting up the project - change in classification at the time of ex-bonding from the warehouse for the home consumption - HELD THAT:- The Adjudicating Authority/Commissioner (Appeals) denied the exemption available for the project import applying the regulation 5 whereby it was interpreted that as per the said regulation of Project Import Regulation, 1986 (PIR, 1986) the assessee’s is required to register the project before the commencement of importation in other word the project should be registered before the goods entered the territorial border of India. In the present case the facts are not under dispute that the goods under the project import have been warehoused under into bond bill of entry thereafter before clearance of the goods from the warehouse under ex-bond bills of entry the project has been registered. In the instant case it is not in dispute that all the contracts and purchase orders in question were registered by the appellant before an order of clearance of home consumption was passed in all 63 bills of entry. Therefore, there are no contravention of Regulation 4 and/or 5 of the PIR, 1986 - Therefore, merely because the project was registered prior to clearance of goods for home consumption from warehouse there is no contravention on the part of the appellant and they are legally entitled for the exemption available to the project import. Change of classification to chapter 98.01 - HELD THAT:- There was no charge in the SCN regarding change of classification. Therefore, entire proceeding on the issue which is not flowing from the SCN is vitiated. It is settled law that an adjudicating authority cannot go beyond the scope of SCN. In view there of this finding of lower authority and the consequent conclusion drawn thereof are totally untenable and needs to be discarded at the threshold - Without prejudice we also find that since at the time of in bonding of goods in warehouse project was not registered obviously classification could not have been made under chapter 9801. In case of project import a specific tariff entry has been created under chapter heading 9801 even though the goods are otherwise classifiable in the respective head of individual item. When the project was registered and ex-bond bills of entry were filed the correct classification was 9801 only. Therefore, we do not find any error on the part of the appellant or there has been no mis-classification of goods. There is a force in the submission of he learned counsel, as regard the information gathered under RTI that at various customs ports even though the into bond bills of entry were filed under tariff item of individual goods but in ex-bond bill of entry the project import has been classified under CTH 9801 and benefit was allowed without raising any objection - the revenue’s contention that the appellant are not allowed to change the classification in the ex-bond bills of entry is absolutely incorrect and illegal. It is settled law that in case of warehousing goods at the time of ex-bond clearance for home consumption, the goods have to be re-assessed under section 2(2) of Customs Act, 1962 - Revenue has no authority to question the change of classification at the time of filing ex-bond bills of entry in the present case which is the correct one as compared to the classification declared in the into-bond bill of entry. Therefore, the revenue has wrongly restricted the benefit of PIR to the appellant. Confiscation of the goods - HELD THAT:- Since the appellant have availed the PIR benefit correctly and legally the confiscation being a consequential to the charge of the revenue shall also not be maintainable. Without prejudice, we find that it is an admitted fact that the goods were cleared from the warehouse and same were never seized and nor released provisionally on execution of any provisional release bond. In this position neither confiscation can be made nor the redemption fine can be made. Consequently, the penalty is also not sustainable - Since on the merit itself we have decided that the appellant is entitled for the benefit of PIR and their appeal against the common order of Commissioner (Appeals) succeeds there is no substance in the Revenue’s appeal and the same is not maintainable. The impugned orders are not sustainable and hence the same are set aside - Appeal allowed. Issues Involved:1. Whether the benefit of project import is available when the contract is registered with the customs authorities after filing an into bond Bill of Entry but before filing an ex-bond Bill of Entry for home consumption.2. Whether a change in classification is permissible at the time of ex-bonding from the warehouse for home consumption.Detailed Analysis:Issue 1: Benefit of Project ImportThe primary issue is whether the benefit of project import is available if the contract is registered with customs authorities after filing an into bond Bill of Entry but before filing an ex-bond Bill of Entry for home consumption. The appellant argued that Regulation 4 of the Project Import Regulation, 1986 (PIR, 1986) stipulates that contracts must be registered before any order is made by the proper officer of customs permitting clearance for home consumption. The phrase 'on or before' in Regulation 5 should be interpreted as 'on or before clearance for home consumption.'The Tribunal found that the appellant had registered all contracts and purchase orders before an order of clearance for home consumption was passed in all 63 bills of entry. Therefore, there was no contravention of Regulation 4 or 5 of the PIR, 1986. The Tribunal referred to various judgments, including Essar Projects India Ltd vs. Commissioner of Customs (2015) and National Aluminium Company vs. CC (2019), which supported the appellant's interpretation. The Tribunal concluded that the benefit of PIR, 1986 is available as long as the contract is registered before an order for clearance of goods for home consumption is made by the proper officer.Issue 2: Change in ClassificationThe second issue was whether a change in classification is permissible at the time of ex-bonding from the warehouse for home consumption. The appellant argued that the classification under Chapter 9801 should apply to all goods imported under the PIR, 1986, even if they were initially classified under different headings at the time of warehousing. The appellant cited Chapter Note 2 of Chapter 98, which states that all goods imported under the PIR should be classified under heading 9801.The Tribunal noted that there was no charge in the Show Cause Notice (SCN) regarding the change of classification. Therefore, any finding on this issue was beyond the scope of the SCN and unsustainable. The Tribunal also found that the correct classification at the time of ex-bonding was 9801, and there was no error on the part of the appellant. The Tribunal referred to the judgment of Commissioner of Customs vs. Tungabhadra Fibres Limited (1994) and noted that reassessment at the time of ex-bonding is necessary to apply the correct classification and duty rate.Confiscation, Redemption Fine, and PenaltyThe Tribunal found that since the appellant had correctly availed the PIR benefit, the confiscation of goods was not maintainable. The goods were neither seized nor provisionally released, so neither confiscation nor redemption fine was applicable. Consequently, the penalty was also unsustainable. The Tribunal dismissed the Revenue's appeal, which challenged the order of the Commissioner (Appeals) for not quantifying the redemption fine and penalty.ConclusionThe Tribunal set aside the impugned orders, allowed the appeals by the assessee, and dismissed the Revenue's appeal. The Tribunal held that the appellant was entitled to the benefit of the PIR, 1986, and the change in classification to Chapter 9801 at the time of ex-bonding was permissible.