2025 (11) TMI 245 - AT - Customs

Imported wind-energy castings are distinct duty-liable parts when Notification provides; assessable value to be reconsidered, CVD limited

Commissioner of Customs, Chennai Versus M/s. Siemens Gamesa Renewable Power Pvt. Ltd.

CESTAT CHENNAI - AT held that imported castings used in wind-energy equipment can be treated as distinct parts liable to countervailing duty when the ... Challenge to provisional assessment - goods under import were specific and distinct products used in WOEGs or are mere castings? - imported goods could be split or vivisected into castings and parts or not - determination of value of castings. HELD THAT:- In its Notification dated November 27, 2015, the DGAD has considered the nature of the castings. It was observed therein that the basic function of a casting was in a wind turbine. It was observed that once a raw casting had been made, it underwent multiple machining operations. It was observed that these castings were often assembled along with other products to prepare a sub-assembly. It was pointed out illustratively that a nacelle sub assembly consisted of a base frame, a gearbox consisted of a planet, carrier, housing, torque arms, and a hub assembly consisted of a rotor hub and a pitch system. On this basis, it was concluded that it was open to a consumer to either buy a casting and other meeting parts separately or buy the sub-assembled product as a whole. Significantly, it was observed that the operations involved in preparing a sub-assembly were quite insignificant in proportion to the overall operations. Therefore, it was concluded that it was feasible for an eventual consumer to buy the sub-assembled product instead of buying the products separately. If the castings cannot be subjected to duty when they are imported as a part of other equipment, then that portion of the Notification which expressly and specifically authorises this, is rendered nugatory. It is well settled that statutes and the law are to be interpreted in such a manner to give effect to them. Besides all these, the Commissioner has not demonstrated how, if his reasoning were to be taken to its logical conclusion, any casting forming part of any other equipment or component would ever be subjected to CVD at all under the Notification under consideration. His reasoning therefore renders this part of the Notification nugatory. We cannot approve of this construction - where the casting is a part of some other component or equipment, duty may be imposed on the casting. This is all the Notification says and it says so simply. Determination of value of the casting - HELD THAT:- On this point, the Revenue has not reached a satisfactory conclusion. Therefore, it is deemed appropriate to remit the matter back to the file of the Adjudicating Authority. That authority is directed to reasonably determine the value of the casting as per law after considering the submissions of the Respondent-Importer. However, if the Authority is unable to determine such a value, no CVD can be levied because, as held by the Hon'ble Supreme Court in CIT v. B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME COURT], there can be no levy if the computation mechanism fails. The Appeal of the Revenue is Allowed for statistical purposes. The matter is remanded to the file of the Adjudicating Authority. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether an order of provisional assessment under Section 18 of the Customs Act, 1962 is a 'decision or order' appealable under Section 128. 2. Whether the Countervailing Duty (CVD) Notification which imposes CVD on 'castings for wind operated electricity generators ... in raw, finished or sub-assembled form, or as a part of a sub-assembly, or as a part of an equipment/ component meant for wind-operated electricity generators' extends to castings that are imported as parts of distinct components or sub-assemblies, and whether such castings can be subjected to CVD notwithstanding that the imported item has acquired a distinct nomenclature. 3. Whether the value of a casting, when imported as part of a larger component or sub-assembly, can be separated (vivisected) from the value of the resulting item for the purpose of computing CVD; and, if separability is accepted, the proper approach to determine such value under the valuation provisions. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Appealability of provisional assessment Legal framework: Section 128 grants right of appeal against 'any decision or order'. Provisional assessments are made under Section 18 of the Customs Act. Precedent treatment: The Tribunal follows decisions holding that provisional assessment orders affecting rights of parties are appealable (coordinate Bench authorities and several Tribunal/High Court decisions cited). Interpretation and reasoning: The Tribunal reads the phrase 'any decision or order' in Section 128 broadly; simultaneous use of both words indicates legislative intention to widen scope of appeal rights. When a provisional assessment affects rights and is agreed to by a party, statutory appeal remedy is available. Relevant precedents support that no legal bar exists to appeal against provisional assessments. Ratio vs. Obiter: Ratio - Provisional assessment orders that affect rights are appealable under Section 128. Obiter - reliance on particular cited authorities is explanatory rather than determinative beyond the proposition. Conclusion: The Commissioner (Appeals) correctly entertained the appeal against a provisional assessment; the preliminary objection by Revenue is rejected. Issue 2 - Scope and interpretation of the CVD Notification (castings in raw/finished/sub-assembled form or as part of sub-assembly/equipment) Legal framework: The language of the CVD Notification imposes duty on 'castings' for wind generators, including when existing in raw, finished, sub-assembled form or 'as a part of a sub-assembly, or as a part of an equipment/ component' meant for such generators; tax statute interpretation principles apply, including giving effect to language used. Precedent treatment: Reference made to DGAD Notification and prior Tribunal decision which addressed validity of CVD imposition but did not determine whether particular items fall within notification. The Tribunal distinguishes that prior decision as not addressing the present interpretive issue. Interpretation and reasoning: The Tribunal adopts a plain-textual approach: the Notification's words are clear and authorize levy on castings even if they form part of sub-assemblies or other components. The notification aims to capture castings whether imported standalone or as part of assembled items to prevent circumvention. Emphasis on giving effect to each part of the statutory language; construing the term 'as' narrowly to exclude castings when part of assemblies would render that express portion nugatory. The fact that imported goods may be finished, machined or assembled does not negate that the imported item includes castings liable to CVD. Ratio vs. Obiter: Ratio - The Notification applies to castings even when they are imported as part of larger components or sub-assemblies; plain textual meaning controls in tax context. Obiter - observations on DGAD's reasoning about proportion of machining and policy considerations are supportive but not the primary basis. Conclusion: The Commissioner's conclusion that the Notification applies only to pure castings and not to castings forming part of other components is not tenable; castings within imported parts/sub-assemblies are within the scope of the Notification and liable to CVD (subject to valuation issues in Issue 3). Issue 3 - Vivisection of assembled items and valuation of casting portions Legal framework: Valuation for customs and duties governed by Section 14 and Valuation Rules; levy of duty requires a workable computation mechanism. Principle from higher authority: levy cannot stand if computation mechanism fails. Precedent treatment: Tribunal refers to Supreme Court principle that there can be no levy if the computation mechanism fails; DGAD analysis supports notion of limiting duty to casting portions of sub-assemblies to avoid defeating purpose of duty while not extending to entire sub-assemblies. Interpretation and reasoning: The Tribunal rejects the Commissioner (Appeals) categorical prohibition on vivisection. It accepts that where imported items include castings, the CVD may be imposed on the casting portion even though the item is a distinct product with value additions. However, the Tribunal finds Revenue has not established an acceptable method to determine the value of the casting portion. Section 14 and valuation rules do not contemplate arbitrary splitting without evidence; the adjudicating authority must reasonably determine casting value after considering submissions. If valuation of the casting portion cannot be determined in accordance with law, no CVD can be levied because the computation mechanism would fail. Ratio vs. Obiter: Ratio - Vivisection to subject casting portions to CVD is permissible in principle; levy requires a legally sustainable valuation of the casting portion. Obiter - observations on the impossibility of vivisection in particular factual matrices and the Commissioner's rationale are criticized as undermining the Notification but are not adopted. Conclusion: Vivisection is legally permissible to the extent necessary to identify and tax the casting portion of an imported assembled item, but the case must be remanded for the Adjudicating Authority to determine the value of the casting in accordance with valuation law and submissions of the importer; absence of a reliable valuation precludes levy. Cross-references and operative outcome Cross-reference: Issue 2 establishes that castings within assemblies are within the Notification; Issue 3 qualifies that inclusion by requiring a lawful valuation method before CVD can be imposed. If valuation cannot be satisfactorily determined, no CVD can be levied. Operative direction (ratio): Appeal on merits allowed insofar as the Notification covers castings imported as part of assemblies; remand to Adjudicating Authority to determine value of casting portions per valuation law; if value cannot be determined, CVD cannot be levied.