Substantive classification controls project-import duty, and prior registration does not bar final assessment as captive power plant

Classification of an imported plant turned on its substantive character: a captive power plant set up to supply power exclusively to a dedicated user was treated differently from a power generation project serving consumers generally. On the facts, the plant was held to be captive because the user had substantial ownership and control, and the conditions under the Electricity Rules, 2005 supported that status. Prior registration under the project import scheme did not prevent the Department from applying the correct duty rate at final assessment, especially where assessment remained provisional. The concessional rate for a power generation project was therefore unavailable, and the import was classified as a captive power plant.

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Issues: Whether the imported plant was correctly treated as a captive power plant eligible only for the lower concessional customs duty, and whether prior project-import registration precluded reclassification at the stage of finalization of assessment.

Analysis: The distinction between a power generation project and a captive power plant was held to be material. A captive power plant is one set up to supply power to a dedicated user, whereas a power project serves consumers generally. On the facts, the plant was established to cater exclusively to the captive user, which held substantial ownership and controlled the respondent company, and the conditions under Rule 3 of the Electricity Rules, 2005 also supported captive status. The registration under the project import scheme did not prevent the Department from applying the correct duty rate when the assessment was still provisional. The lower rate applicable to a power generation project could not be applied merely because the contract had been registered.

Conclusion: The plant was rightly classified as a captive power plant, and the concessional duty rate applicable to a power generation project was not available.

Final Conclusion: The departmental appeal succeeded and the assessment was restored in accordance with the lower authority's classification of the import as a captive power plant.

Ratio Decidendi: For project imports, the correct concessional duty depends on the substantive nature of the plant, and prior registration under the project import regulations does not bar final assessment at the proper duty rate where the plant is in substance a captive power plant.

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