TaxTMI 
TaxTMI 
2013 (3) TMI 530
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....dated 27-6-2011 and 2-9-2011 (with packing lists) and two irrevocable Letters of Credit dated 8-12-2000 and 11-7-2011 (Axis Bank Ltd., Dubai) were also filed with the Bills of Entry. The invoices showed M/s. Reliance Infra Projects International Ltd., British Virgin Islands, as the exporter of the goods. SPL sought provisional assessment of the goods on the basis of a provisional Mega Power Project Status Certificate dated 21-9-2011 issued by the Ministry of Power, Govt. of India. In a letter dated 10-10-2011, they also informed the Deputy Commissioner of Customs that the words "expansion project" in para (a) of the said certificate were subsequently deleted by the Ministry. A copy of the amendment dated 4-10-2011 was also produced by SPL. 2. Earlier, on 24-9-2011, SPL had submitted an application to the Deputy Commissioner of Customs for registration of an EPC Contract dated 31-7-2010 with its amendments under the Project Import Regulations, 1986 (PIR, for short) for the purpose of availing the aforesaid exemption for the goods covered by the two Bills of Entry. The following documents were also produced in support of SPL's application : (i) Annexure A, (ii) Li....
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....act and the amendments thereof, the responsibility of payment of customs duty was on Reliance Infrastructure Ltd. (RIL, for short), (d) that the goods imported earlier for the project were cleared on payment of duty by RIL as importer, (e) that, by virtue of Cus. Notification 65/2011, the benefit of exemption could be availed only by the project developer/owner i.e., SPL, (f) that the description of goods under Heading 9801 was relevant to classification only, and (g) that the clearance of earlier consignments under merit assessment did not preclude SPL from getting the project contract registered under PIR and availing exemption for the present consignments. 4. With reference to the above submissions of SPL, further queries were made and additional documents called for SPL by letter dated 19-10-2011 replied to the queries (vide infra) and furnished the required documents (vide infra) : Queries/Documents : I. Ministry of Power's provisional Mega Power Project Status Certificate dated 21-9-2011. Copies of the documents mentioned in the certificate : (i) Attested copies of contracts with the manu....
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....er. (ii) M/s. Samalkot Power Limited's request dated 24-9-2011 for registration of contract dated 31-7-2010 under Project Import Regulations, 1986 should not be rejected as the said project is an expansion project an not an initial setting up category project. (iii) The goods imported for which Bills of Entry Nos. 4875426 and 4875427 both dated 10-10-2011 have been filed, in respect of which duty exemption under sub-para No. 400(b) of Customs Notification No. 21/2002 dated 1-3-2002 read with Customs Notification No. 65/2011 dated 21-7-2011 has been claimed should not be rejected as the goods imported are for expansion project and not for initial setting up. (iv) The provisional Mega Power Project Status Certificate dated 21-9-2011 and the amendment dated 4-10-2011 issued by the Ministry of Power should not be treated as not valid document for claiming duty exemption under Sl. No. 400(b) of Customs Notification No. 21/2002 dated 1-3-2002 read with Notification No. 65/2011 dated 21-7-2011 as the said project is an expansion project and not an initial setting up category project. (v) The registration sought for un....
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.... of legal provisions and consideration of case law, the adjudicating authority answered the first and fourth issues in the affirmative and other issues in the negative vide Order-in-Original No. 10/2011 dated 15-12-2011 whereby SPL's claims were rejected, RIL was directed to file Bills of Entry in respect of the subject goods, and the goods were ordered to be classified under the respective Headings/Sub-headings of the CTA Schedule and be assessed to duty on merits. 7. On appeals by SPL and RIL, the order-in-original came to be upheld, on all issues, by the Commissioner of Customs (Appeals) whose order dated 16-1-2012 is presently under challenge. 8. We have perused the grounds of the two appeals and heard the submissions of the learned counsel for the appellants and the learned Special Consultant for the respondent. 9. The case of SPL (a) The existing 220 MW gas-based power plant at Samalkot is owned by RIL and not by SPL, and the findings to the contra are factually incorrect and even beyond the scope of the show-cause notice. Though initially the 2400 MW Samalkot power project was envisaged as an "expansion project" of RIL in relation to th....
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....sued by the Principal Secretary (Energy) to Govt. of Andhra Pradesh, qua "Sponsoring Authority" under the Project Imports Regulations, 1986 has certified that the power project in question is for "initial setting-up" of 2400 MW Samalkot gas-based Power Plant. (d) The authorities below while holding that the provisional Mega Power Status Certificate issued by the MoP was for "substantial expansion" of the existing 220 MW power plant overlooked the fact that the existing power plant and the 2400 MW power project were owned by different legal entities. (e) The test laid down by Hon'ble Supreme Court to determine whether a unit is to be considered as a new industrial unit or as part of an existing unit should have been applied to the present case by the authorities below. [Commissioner v. Reckitt Colman of India Ltd. : 1997 (92) E.L.T. 457 (S.C.) and Textile Machinery Corporation Ltd. v. CIT : 1977 (2) SCC (368) relied on]. If the test is applied to the present case, the 2400 MW power project has to be held to be setting up of a new power plant. (f) In the case of Mangalore Refinery and Petrochemicals Ltd. v. Commissioner : 2005 (187) E.L.T.....
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....n No. 86(aa) in Notification No. 21/2002-Cus., which overrides the requirement where the assessment is provisional as in the present case. (k) M/s. Reliance Power Ltd. (RPL, for short) signed the EPC Contract with RIL and the latter subsequently signed an Offshore Equipment Supply Contract with M/s. Reliance Infra Project International Ltd., which, in turn, placed order with M/s. General Electric Inc. for supply of the main equipments for the proposed power plant. Later on, through a tripartite agreement between SPL, RPL and RIL, SPL took the place of RPL in the EPC Contract and thereby became the developer/owner of the proposed Samalkot 2400 MW Power Project. The authorities below ought not to have considered the EPC Contract in isolation regardless of the back-to-back contract which RIL had entered into with the foreign supplier. In view of the clear link established by SPL, the EPC Contract ought to have been accepted for registration under the PIR as SPL satisfied the eligibility conditions under Regulation 4 and followed the procedure under Regulation 5 of the PIR. (l) Registration of the EPC Contract should not have been declined on the ground th....
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....overed by the two Bills of Entry dated 10-10-2011, for which SPL is the importer as per Section 2(26) of the Customs Act. The title to the goods was passed to SPL by way of high seas sale of the goods by RIL to SPL. After the high seas sale of the goods, SPL is the owner of the goods. The Bills of Lading were also endorsed in favour of SPL. (b) Both the Bills of Entry were filed by the high seas buyer qua owner and importer of the goods. Copies of the high seas sale agreements were also furnished. Two per cent loading on the value of the goods as per the relevant Circular of C.B.E. & C. was also done. Therefore both the Bills of Entry are liable to be assessed in the name of SPL. (c) RIL was awarded the EPC Contract for setting up the 2400 MW power project. Since the power project is covered by a provisional Mega Power Project Status Certificate, the import of goods for such project would attract the benefit of the Notification. (d) In case RIL is held to be the importer, the benefit of Notification No. 21/2002-Cus. should be extended to RIL because the benefit of the Notification is qua the goods and not qua the importer. RIL has since ....
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.... from RIL at the high seas. High seas sale was set up to claim the benefit of the Notification. (f) All the approvals and clearances had been obtained by RIL from various Government Ministries/Departments/Agencies (MoEF of Government of India/Irrigation Department of Government of Andhra Pradesh/Energy Department of Government of Andhra Pradesh/A.P. Pollution Control Board) for an "expansion project" with reference to the existing 220 MW power plant. All imports by RIL from June 2011 to November 2011 were made for this purpose only. The transfer of such clearances/approvals from RIL to SPL would not per se alter the nature of the project and make it a "Greenfield project". 2400 MW power project remains an "expansion project" with reference to the existing 220 MW power plant. (g) An application under the PIR for registration of any EPC contract has to be filed on or before importation. In the present case, the application was submitted after the importation. The contract to be registered should be one between the Indian importer and the foreign supplier. The EPC Contract between SPL and RIL therefore cannot be registered under the PIR. Moreover, the spo....
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....r Heading 9801 should be claimed in respect of all the goods imported for the purpose of the project. The importer has no option to claim the benefit of project import in respect of some consignments and to clear other consignments on payment of duty. Once a contract for project import in registered with the Customs House, its de-registration in full or part is not permissible as clarified in C.B.E. & C.'s Circular F.No. 528/213/87-Cus. (TU), dated 8-8-1987. The same logic is applicable to non-registration as well. The concept of all the goods imported for a project having to be considered as a composite unit classifiable under Heading No. 84.66 of the CTA Schedule (predecessor to Heading No. 98.01) was approved in the case of Appraiser, Madras Customs v. Tamil Nadu Newsprint Paper Ltd. - 1988 (36) E.L.T. 272 (Mad.). The same concept was embodied in the above Circular dated 8-8-1987. Therefore, what requires to be classified under CTH 9801 is a whole lot of goods imported for the purpose of implementation of a project. A part of this composite unit cannot be classified for assessment as a project import. 12. We have carefully examined the records of the case and have given ....
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....he MoP's letter dated 2-4-2012 states inter alia that a thermal power plant of capacity 1000 MW or more is eligible for provisional Mega Power Status irrespective of whether it is an expansion project or a 'Greenfield' project. Accordingly, the Ministry has found it inappropriate to withdraw the provisional Mega Power Status Certificate issued to SPL. (c) SPL has expressed their willingness to comply with Condition No. 86(aa) introduced by Notification No. 65/2011-Cus., dated 21-7-2011, in the event of the subject Bills of Entry being accepted for assessment. The said condition, which was added to Sl. No. 400 of Notification No. 21/2002-Cus., reads thus : "(aa) In case of imports for a project for which the certificate regarding Mega Power Project Status issued by an officer not below the rank of Joint Secretary to the Government of India in the Ministry of Power is provisional, the importer furnishes a security in the form of a Fixed Deposit Receipt from any Scheduled Bank for a term of thirty six months or more in the name of the President of India for an amount equal to the duty of customs payable on such imports but for this exemption, to the Deputy Commission....
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....or the exemption. The importer has to produce the final Mega Power Project Status Certificate within a period of 36 months from the date of importation. SPL is said to be willing to do so. (d) The text of entry 400 of Notification No. 21/2002-Cus. pertains to goods required for setting up of any "Mega Power Project" so certified by the specified authority. The entry classifies the good under CTH 9801, which takes us to Chapter 98 of the CTA Schedule. Chapter Notes 1 and 2 being relevant are reproduced below : Notes : 1. This Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein even though they may be covered by a more specific heading elsewhere in this Schedule. 2. Heading 9801 is to be taken to apply to all goods which are imported in accordance with the regulations made under Section 157 of the Customs Act, 1962 (52 of 1962) and expressions used in this heading shall have the meaning assigned to them in the said regulations. The text of Heading 9801 reads : Tariff Item Description of goods 9801 All items of machinery including prime m....
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.... proposed 2400 MW cannot use the transmission line of the existing 220 MW power plant due to the difference in generation voltage, (d) that the 2400 MW power plant cannot use the gas and water pipelines of the existing power plant of small capacity, and (e) that any one power plant can independently function even when the other one is shut down. This evidence adduced on behalf of SPL has not been contested before us. Considering the technological, operational and other differences between the two power plants certified by the experts, we hold the view that the 2400 MW power project cannot be considered to be an "expansion project", in the hands of SPL, with reference to the existing 220 MW power plant owned by RIL. It would follow that, as far as SPL is concerned, the 2400 MW power project should be considered to be "setting up of a new power plant". (f) However, insofar as RIL is concerned, the position is different inasmuch as it has been conceded on behalf of the department that RIL has the option of assessment under Heading 9801 in the 'substantial expansion category". If RIL claims the benefit of project import in respect of the 2400 ....
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....or the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified ... power project" means, to our mind, that the whole lot of items required for the setting up of a power plant or for the substantial expansion of an existing power plant will constitute a bundle or cluster to be covered by Heading 9801. The Chapter Notes appear to support this legal fiction embodied in Heading 9801. If some of the items/goods are removed from this bundle, the residue will not go to constitute a new power plant or an expanded power plant. Therefore, it is imperative that, for classification under Heading 9801, the bundle of items/goods must be complete so as to be considered to be "required for the setting up of a power plant or for the substantial expansion of an existing power plant". In the present case, it is not in dispute that a substantial part of the material requirements for the 2400 MW power project covered by the EPC contract were imported by RIL and cleared on payment of duty at merit rates. RIL, admittedly, did so from time to time - before the date of issue of the show-cause notice, between that date and the date of passing of the Order-in-Original a....