2024 (8) TMI 674 - AT - Customs

Revenue's appeal dismissed as imported roller sets and mill blades qualify as capital goods under SHIS license benefits despite phased imports

CESTAT Kolkata dismissed Revenue's appeal challenging exemption benefits under N/N. 104/2009-Customs for imported goods. Revenue contended imports were ... Import of Spares/Parts or Capital Goods? - eligibility for the benefit of the N/N. 104/2009-Customs dated 14-09-2009, as amended by N/N. 42/2012-Customs dated 22-06-2012 - allegation of the Revenue is that the imports are neither related to 'Capital goods imported earlier' nor are 'Capital goods' themselves and hence cannot be imported under SHIS license by claiming the benefit of exemption given by the said Notification ibid. HELD THAT:- It is observed that the goods imported by the Respondent are not merely spares/parts as alleged in the Notice. They are 'Capital Goods' as defined in the policy. Further, the restriction of 10% is only with respect to import of components, spares/parts of capital goods imported earlier. Thus, import of capital goods (including accessories thereof) which have not been imported earlier, can be imported by utilizing SHIS without any restriction. The import of Parts/Spares/Components in the form of' Roller Sets', 'Spacers', 'Spares for Cold rolling Mills' & 'Blades for slitting Machines' falling under Customs Tariff Item Nos. 84559000 & 82089090 respectively come under the ambit of definition of 'Capital Goods', which are to be used in the setting up 'Cold Roll Forming Mill Lines' for manufacture of 'Engineering goods'. It is observed that in respect of all the 10 BEs, the respondent has imported capital goods or their accessories along with their spares/parts and therefore the benefit of the exemption is clearly available to the goods imported. The Chartered Engineer's certificate submitted by the Respondent clearly establish that the goods imported are integral parts/components of the capital goods which are essential to make the plant operational. It is observed that the Respondent has placed their reliance on the decision in the case of COMMISSIONER OF CUSTOMS, CHENNAI VERSUS M/S. JSW STEEL LTD. [2015 (10) TMI 2392 - CESTAT CHENNAI], wherein it was held that Capital goods definition given under the notification is identical to the definition given in the FTP and covers 'plant, machinery, equipment or accessories required for manufacture, production either directly or indirectly which includes components/spares required for replacement, modernization, technological upgradation and expansion etc. The Respondent has placed their reliance on the decision in the case of COMMISSIONER OF CUSTOMS, CHENNAI VERSUS M/S. JSW STEEL LTD. [2015 (10) TMI 2392 - CESTAT CHENNAI], wherein it was held that Capital goods definition given under the notification is identical to the definition given in the FTP and covers 'plant, machinery, equipment or accessories required for manufacture, production either directly or indirectly which includes components/spares required for replacement, modernization, technological upgradation and expansion etc. It is observed that the case law cited supra has direct application in the instant case. Similar to the facts of the decision, in this case also there was a single Contract between the supplier and the Respondent for the import of the entire equipment of plant and machinery for their 'Stainless Steel Slitting Line and Cold Rolled Forming Mill Lines for production of 'Railway Wagon and other related parts' in their factory under a single quoted price. When the Respondent was to import as per the contract, the whole plant and machinery for Stainless Steel Slitting Line & Cold Rolled Forming Mill Lines, the entire goods cannot be imported in one lot under a single Bill of Entry. Further, the Chartered Engineer's Certificate dated 18.04.2015, categorically certified that entire Capital Goods imported under SHIS Scheme have been installed and the department has also accepted the same as a fulfilment towards licence obligation. Thus, the Respondents have imported 'Capital Goods' which are eligible for the benefit of the Notification No. 104/2009-Customs dated 14-09-2009, as amended and the benefit of the notification has been rightly allowed by the ld. adjudicating authority. There are no infirmity in the impugned order passed by the ld. adjudicating authority dropping the demands raised in the Notice - appeal filed by Revenue dismissed. Issues Involved:1. Eligibility of imported goods for exemption under Notification No. 104/2009-Customs.2. Compliance with conditions of the Foreign Trade Policy (2009-14) and the Notification No. 104/2009-Customs.3. Definition and classification of imported goods as 'Capital Goods' or 'Spares/Parts'.4. Interpretation of the percentage limit on the use of SHIS licenses for importing spares/parts.Detailed Analysis:Issue 1: Eligibility of Imported Goods for Exemption under Notification No. 104/2009-CustomsThe core issue was whether the imported goods, including 'Roller Sets,' 'Blades for Slitting Machines,' 'Spacers,' and 'Spares for Cold Rolling Mills,' qualified for the exemption under Notification No. 104/2009-Customs. The Revenue contended that these goods did not meet the criteria for 'Capital Goods' as defined in the Foreign Trade Policy (FTP) (2009-14) and the said notification. The Tribunal observed that the definition of 'Capital Goods' in the FTP is broad enough to include spares/parts required for manufacturing or production. The Tribunal concluded that the imported goods fell within this definition and were thus eligible for the exemption.Issue 2: Compliance with Conditions of the Foreign Trade Policy (2009-14) and Notification No. 104/2009-CustomsThe Revenue argued that the Respondent violated Para 3.16.3 of the FTP and conditions 4(i) & 4(iii) of Notification No. 104/2009-Customs by using SHIS licenses beyond the permissible limits for importing spares/parts. The Tribunal noted that the Respondent had provided a Chartered Engineer's Certificate confirming the installation and use of the imported goods in the capital equipment. The Tribunal found no violation of the conditions, as the goods were integral parts of the capital goods necessary for the operational setup of the 'Stainless Steel Slitting Line and Cold Rolled Forming Mill Lines.'Issue 3: Definition and Classification of Imported Goods as 'Capital Goods' or 'Spares/Parts'The Revenue's position was that the imported items were merely spares/parts and not 'Capital Goods.' The Tribunal referred to the definition in the FTP, which includes machinery, equipment, and accessories required for production, including those for replacement and technological upgradation. The Tribunal determined that the imported items, being integral to the capital goods, fit within this definition. The Tribunal also referenced the case of Commissioner of Customs, Chennai vs. JSW Steel Ltd., where a similar interpretation was upheld.Issue 4: Interpretation of the Percentage Limit on the Use of SHIS Licenses for Importing Spares/PartsThe Revenue contended that the Respondent exceeded the 10% limit of the scrip value for importing spares/parts, as stipulated in Para 3.16.3 of the FTP and condition 4(iii) of Notification No. 104/2009-Customs. The Tribunal clarified that this restriction applies only to spares/parts of capital goods imported earlier. Since the Respondent imported the entire setup, including capital goods and their parts, the 10% limit was not applicable. The Tribunal upheld that the imports were for setting up new capital goods and hence did not breach the stipulated limits.Conclusion:The Tribunal upheld the adjudicating authority's order, confirming that the Respondent's imports were indeed 'Capital Goods' and eligible for the exemption under Notification No. 104/2009-Customs. The Tribunal found no merit in the Revenue's appeal and dismissed it, affirming that the Respondent complied with all relevant conditions and definitions as per the FTP and the Notification.