2025 (6) TMI 1678 - AT - Customs

Revenue appeal dismissed as importer gets retrospective Mega Power Project duty benefits under S.No.400 despite delayed final certification

Commissioner of Central Tax Visakhapatnam - I Versus GMR Kamalanga Energy Ltd

CESTAT Hyderabad dismissed Revenue's appeal regarding project import duty benefits. The importer initially claimed concessional duty under S.No.399 of ... Entitlement for benefit of N/N. 21/2002-Cus (S.No.400) or otherwise - Project import - Mega Power Project status - non-possession of either provisional or final Mega Power Project status, on the date of clearance of four out of five consignments - In-principle Mega Power Project status was granted at the time of import clearance - power to review the order of Commissioner (Appeals) - HELD THAT:- There is no dispute as regards classification of the goods under CTH 9801, which covers project imports. In other words, the heading 9801 will cover the goods which are imported, whether in one or more than one consignment, against one or more specific contracts, which have been registered with the appropriate Custom House in the manner specified in regulation 5 of Project Imports Regulations, 1986. The respondents had initially claimed entry at S.No.399 of notification 21/2002. This entry, inter alia, provides for concessional rate of duty in respect of power generation projects and there is no condition attached for the same. There is no dispute with regard to certificate dt.01.02.2012, whereby, the Joint Secretary to the Government of India in the Ministry of Power has certified that Kamalanga Power Project being set up at Dhenkanal District, Orissa of the respondent is a thermal power plant of capacity of 3 x 350 MW and that the power purchasing States have constituted the Regulatory Commissions with full powers to fix tariff and the power purchasing States shall undertake to carry out distribution reforms as laid down by Ministry of Power. The certificate dt.01.02.2012 is in substantive compliance with the conditions attached for availing benefit under S.No.400 of Notification 21/2002 and said certification granting the status of Mega Power to the project of 3x350 MW at Dhenkanal is in continuation of ‘Inprinciple’ and ‘Provisional’ grant of Mega Power Project status. The said project was an ongoing project and it is not disputed that it was accorded status of Mega Power as per Mega Power Plant Policy of Ministry of Power. Further, it is not in dispute that the provisional assessment has been not resorted to and even though the department is claiming that it has been resorted to for the purpose of project import and value and not for the rate of duty, there is nothing in the Project Import Regulations, 1986 that the assessment has to be kept provisional only for the purpose of value - Once at the time of finalization, if benefit under notification is claimed, which is more apt or suitable to the respondent, even within the overall scope of project import, he is entitled to avail the same and accordingly, once they claimed the benefit of S.No.400, instead of S.No.399 of the Notification 21/2002, which was claimed initially, we find there was no infirmity in the same. It is not in dispute that assessment was provisional in terms of section 18 as there is no other provision where assessment can be kept provisional. Thus, on finalization, the earlier assessed duty could be changed, if required, in view of change in classification, availability of conditional/unconditional notification, finalization of contract value, etc. - the respondent had registered their project import again on receipt of provisional status and department has no objection to extend the benefit on the strength of some post-amended registration under project import. However, on the date of finalization, while the value is not in dispute in relation to 3x350 MW project, the benefit of notification is being denied as it was not in force on the date of import. It is found that the rate of duty has to be read with notification, if any, at the time of finalization of provisional assessment and since there is no change in duty at the time of provisional assessment and only benefit of notification has been extended in the given factual matrix, the provisions of section 15 would not be relevant. There are no force in the counter by the respondents that the grounds of appeal has gone much beyond the grounds of appeal approved by the competent authority, who has the power to review the order of Commissioner (Appeals) and therefore, we are not taking up some of the grounds, other than what have been specifically permitted by the competent authority for review. It is also not in dispute that one unit of 350 MW capacity was neither claimed nor considered for benefit at S.No.400 or for that matter the goods imported were meant for any other project. Further, entire imports covered under impugned 5 BEs are under project import classifiable under CTH 9801. As far as reliance placed by the learned AR on the judgment of CC (Import), Mumbai Vs Dilip Kumar & Company [2018 (7) TMI 1826 - SUPREME COURT (LB)], it is found that there is no grey area in the interpretation of this notification inasmuch as the substantive requirement of having a certificate certifying it as Mega Power Project is already complied with and is not being disputed except for the fact that there was no such status prior to final certificate/provisional certificate - Since this issue is already discussed, that the status given on 01.02.2012 is in continuum of earlier certificates and therefore, that status certificate is applicable to the entire project and therefore, this case law is not relevant in the factual matrix of this appeal. As regards amendment notification giving benefit to projects having provisional status, it is found that this merely provides for certain procedural relaxation in terms of bond/ security, etc., for project import for Mega Power Plant and it does not specifically allow benefit of parent notification to units holding provisional status so as to construe that provisional status was specifically brought in for extending notificational benefit. Conclusion - The final Mega Power Project status certificate dated 01.02.2012 is in substantive compliance with the notification's requirements and is a continuation of the earlier 'In-principle' and 'Provisional' statuses. The benefit of concessional customs duty under S.No.400 of Notification No. 21/2002-Cus is thus applicable retrospectively to the imports made under provisional assessment, even if the final certificate was not issued at the time of import clearance. The appeal filed by the Revenue is not sustainable - Appeal dismissed. The core legal questions considered by the Tribunal in this appeal are:(a) Whether the respondents were entitled to the benefit of Notification No. 21/2002-Cus (S.No.400) in respect of imports made prior to the issuance of the final Mega Power Project status certificate;(b) Whether the 'In-principle' or 'Provisional' Mega Power Project status granted by the Ministry of Power can be equated with the final Mega Power Project status for the purpose of customs duty exemption;(c) Whether the procedural and certification conditions prescribed under Notification No. 21/2002-Cus, including certification by an officer not below the rank of Joint Secretary, were duly complied with;(d) The legal effect of provisional assessment under section 18 of the Customs Act, 1962, particularly whether the rate of duty and eligibility for exemption can be determined at the time of finalization of provisional assessment rather than at the time of import or filing of Bills of Entry;(e) The applicability and interpretation of relevant precedents regarding strict compliance with notification conditions and the timing of entitlement to exemption benefits;(f) Whether the departmental appeal against the refund sanctioned was maintainable on the grounds raised, including whether the appeal exceeded the scope of the sanctioned grounds of review.Issue-wise Detailed Analysis:1. Entitlement to Notification Benefit Prior to Final Mega Power Project Status CertificateThe respondents had initially imported equipment for a 4 x 350 MW coal-based thermal power project and claimed concessional duty under S.No.399 of Notification No. 21/2002-Cus. Subsequently, a Provisional Mega Power Project status certificate was issued for 3 x 350 MW units, and the respondents claimed benefit under S.No.400, which provides nil customs duty for goods imported for Mega Power Projects certified by a Joint Secretary-level officer.The Department contended that since the final Mega Power Project status certificate was issued only on 01.02.2012, the imports made prior to this date (including four consignments cleared between 30.05.2011 and 31.08.2011) were not eligible for the exemption under S.No.400. The Department argued that 'In-principle' or 'Provisional' status does not satisfy the notification's requirements.The Tribunal noted that the respondents had been granted 'In-principle' Mega Power Project status on 16.03.2009, followed by a Provisional status certificate on 19.08.2011, and finally a certificate on 01.02.2012. The final certificate was issued after fulfillment of conditions such as signing of Power Purchase Agreements (PPAs) and undertakings from State Governments regarding distribution reforms. The Tribunal emphasized that the final certificate was a continuation and formalization of the earlier 'In-principle' and 'Provisional' statuses.Relying on the factual matrix, the Tribunal held that the project was an ongoing Mega Power Project from the time of the 'In-principle' status and that the final certificate did not have a purely prospective effect but related back to the earlier statuses. Therefore, the respondents were entitled to the benefit of the notification even for imports made prior to the issuance of the final certificate.2. Legal Effect of Provisional Assessment and Timing of Duty DeterminationThe Department argued that the rate of duty and eligibility for exemption must be determined as on the date of filing the Bill of Entry (BE), citing section 15 of the Customs Act, 1962, which fixes the rate of duty as that in force on the date of presentation of the BE. The Department maintained that provisional assessment was only for valuation purposes and did not affect the eligibility for exemption benefits.The Tribunal examined section 18 of the Customs Act, which allows provisional assessment and finalization at a later stage. The Tribunal noted that provisional assessment is not limited to value determination but can also relate to classification and eligibility for notifications. The Tribunal held that since the assessments were kept provisional, the finalization could consider the benefit of S.No.400 notification if the conditions were fulfilled at the time of finalization, even if they were not met at the time of import or filing of BEs.The Tribunal distinguished the Department's reliance on the 'relevant date' under section 28, clarifying that it relates to limitation for demand of duty and not to the determination of rate or eligibility for notification benefits during provisional assessment finalization.3. Compliance with Certification Requirements under Notification No. 21/2002-CusThe Department contended that the certificate required under the notification must be issued by an officer not below the rank of Joint Secretary and that the respondents did not meet this condition at the relevant time. The Tribunal found that the final certificate dated 01.02.2012 was issued by the Joint Secretary, Ministry of Power, certifying the project as a Mega Power Project after fulfillment of all conditions, including regulatory and distribution reforms.Further, the Tribunal observed that the 'In-principle' and 'Provisional' certificates were issued subject to conditions that were subsequently fulfilled, and the final certificate subsumed these earlier statuses. The Tribunal concluded that the certification requirement was substantively complied with and that procedural delays or interim statuses did not vitiate the entitlement to exemption.4. Interpretation of Precedents on Strict Compliance and Timing of Exemption BenefitsThe Department relied on precedents emphasizing strict compliance with notification conditions and exact fulfillment of mandatory requirements. However, the Tribunal distinguished these cases on facts, noting that in the present case, the respondents had complied with all substantive conditions, and the delay in issuance of the final certificate was not attributable to the respondents.The Tribunal relied on the Supreme Court's decision in CCE Vs MPV Engineering Industries, which permits a liberal approach in granting exemption benefits from the date of application or provisional recognition, provided no violation of the notification language occurs. Similarly, the Tribunal cited CC Vs Tullow India Operations Ltd, which held that conditions beyond the control of the importer, such as issuance of certificates by public authorities, should not preclude entitlement to exemption once fulfilled.These precedents supported the view that the respondents' entitlement to notification benefits should not be denied due to procedural delays in certification issuance.5. Scope of Departmental Appeal and Grounds RaisedThe respondents argued that the appeal filed by the Department went beyond the grounds sanctioned by the competent authority for review. The Tribunal noted this contention but clarified that it would only consider grounds specifically permitted by the competent authority and would not entertain extraneous grounds.The Tribunal found no infirmity in the Commissioner (Appeals) order on the grounds sanctioned and did not delve into additional grounds raised by the Department beyond the scope of the sanctioned appeal.6. Classification and Capacity of the Power ProjectThere was no dispute regarding classification of the imported goods under CTH 9801 as project imports. The Department did not contest the total capacity of the project as 1050 MW (3 x 350 MW) after de-linking one unit of 350 MW. The Tribunal noted that the assessing officer and Commissioner (Appeals) had accepted the project capacity and location as consistent with the Mega Power Project status.Application of Law to Facts and Conclusions:The Tribunal applied the provisions of the Customs Act, particularly sections 15 and 18, and the terms of Notification No. 21/2002-Cus, alongside the Project Imports Regulations, 1986. It held that provisional assessment under section 18 permits finalization of duty and exemption eligibility based on conditions prevailing at finalization rather than strictly at import or BE filing date.The Tribunal found that the respondents had obtained 'In-principle' and 'Provisional' Mega Power Project status well before the imports and that the final certificate issued on 01.02.2012 was a formal confirmation of the project's status, subsuming prior statuses. Procedural delays in certification issuance did not negate the substantive compliance with notification conditions.The Tribunal gave due weight to the verification report confirming installation of goods for the project and the PPAs and undertakings from State Governments, which satisfied the conditions for Mega Power Project status. It rejected the Department's strict interpretation that denied exemption benefits due to the absence of final certification at the time of import.The Tribunal also distinguished the Department's reliance on precedents requiring strict compliance, emphasizing the factual matrix and the principle that procedural delays beyond the importer's control should not defeat exemption claims once conditions are fulfilled.Finally, the Tribunal declined to entertain grounds of appeal beyond those sanctioned for review and upheld the Commissioner (Appeals) order sanctioning the refund.Significant Holdings:'Once all the relevant conditions were satisfied, all earlier certification, irrespective of whether given 'In-principle' or 'Provisional' stands subsumed and finalized in the Mega Power Project status certificate issued by Ministry of Power, which incidentally has not been referred as final certificate and the status of project has to be considered as 'Mega Power Project'.''The rate of duty has to be read with notification, if any, at the time of finalization of provisional assessment and since there is no change in duty at the time of provisional assessment and only benefit of notification has been extended in the given factual matrix, the provisions of section 15 would not be relevant.''In a statute where there is a provision for a provisional assessment and/or provisional clearance, subject to compliance of certain conditions, such conditions may be fulfilled at a later stage, namely, at the stage of final clearance or final assessment.''The benefit of exemption will accrue to a unit found to be small scale industrial unit from the date on which the application was made for grant of registration certificate. Such a unit should not be deprived of the benefit to which it is otherwise entitled ... merely because the authorities concerned took their own time in disposing of the application.'The Tribunal's final determination was that the respondents were entitled to the benefit of Notification No. 21/2002-Cus (S.No.400) for all the impugned imports, including those made prior to the issuance of the final Mega Power Project status certificate, by virtue of the continuity of 'In-principle' and 'Provisional' statuses and the principles governing provisional assessment and exemption benefits. Consequently, the appeal filed by the Revenue was dismissed, and the refund sanctioned by the Original Authority and upheld by the Commissioner (Appeals) was affirmed as legal and proper.