TaxTMI 
TaxTMI 
2007 (5) TMI 76
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....a business tie up with an existing company/project by entering into an 'agreement to sell' in order to set up wind- energy based independent power project. The business activities proposed to be undertaken by the applicant are set out in Annexure-II to the application as follows: "BUSINESS ACTIVITY TYPE-I — Enercon India Ltd. intends and desires to set up power generation projects across India in different states by harnessing wind energy by setting up large number of independent power generation projects along with power stations, whereby electricity so generated will be connected to local grid supplying power to consumers for which a separate division called IPP division is being carved out in their organizational set up. The IPP division shall set up an independent power generation project of different capacities by importing from places outside India goods i.e. machinery instruments, apparatus appliances transmission equipment, auxiliary equipment components raw material etc falling under Chapter 98 Tariff Item 9801 and after installing and commissioning the same to effectively generate the electricity for the nation. Enercon India Ltd. after installing and commissioning i....
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.... 1975 by virtue of serial No. 84, list 5, item 13 of Central Excise Notification No. 6/2006-C.E., dated 1-3-2006?' (c)Whether the said goods referred to in Question No. 1 will be eligible for exemption from the whole of the additional duty of customs under Section 3(5) of the Customs Tariff Act, 1975 by virtue of serial No. 11 of Custom Exemption Notification No. 20/2006-Cus., dated 1-3-2006?" 5. The Commissioner of Customs (Import), Nhava Sheva, Raigad, Maharashtra in his comments stated that Chapter Heading 9801 of the First Schedule to the Customs Tariff Act, applies only to specified projects sponsored by specified sponsoring authorities with a detailed itemized list of goods to be imported duly attested by the sponsoring authority and imported under specific contracts registered prior to the import of the goods. In this application, there is no such sponsored project and there is no specific list of goods duly approved by the sponsoring authority as being required for the Project. Hence it is not possible to extend the facility of Heading 9801 to the applicant. Again in Para 3 it is stated that the classification under 9801 i.e. project imports starts with a sponsoring t....
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.... minerals, and (6) Such other project as the Central Government may having regard to the economic development of the country notify in the Official Gazette in this behalf; and spare parts, other raw materials (including semi finished material) or Consumable Stores not exceeding 10 % of the value of the goods specified above provided that such spare parts, raw materials or consumables stores are essential for the maintenance of the plant or project mentioned in (1) to (6) above Machinery: 9801 00 11 ---For industrial plant project…… Kg. 12.5% - 9801 00 12 ---For irrigation plant….. Kg. 12.5% - 9801 00 13 --- For power project……. Kg. 12.5% - 9801 00 14 ---For mining project……. Kg 12.5% - 9801 00 15 --- Project for exploration of oil or other minerals….. Kg. 12.5% - 9801 00 19 ---For other projects……. Kg. 12.5% - *Emphasis supplied. Note 2 of Chapter 98 is important. It lays down: "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 ....
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....bsp; - ---- ---- ----------------- ----- ------ ------- 7.4 The Heading No. 9801 also occurs at some other serial numbers, but we are not concerned with them. Suffice it to refer to Sl. No. 441, which reads as follows : S. No. Chapter or Heading or sub-Heading Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6) 441. 9801 All goods 7.5% - - Having regard to the specific entry relating to goods required for certain projects, this general entry will not be of relevance in the instant case. 7.5 It is seen from the Notification No. 21/2002-Cus. that the goods required for the power generation projects (excluding certain categories of captive power plants) are liable to bear the maximum basic duty (standard rate) at 5% and the maximum additional duty rate at 16%. Anything above that rate stands exempted. There is no doubt that this notification will apply only to the goods falling under the Heading 9801 and imported in accordance with the requirements laid down in Chapter 98. When we go back to the Chapter 98, Note 2 referred to earlier assumes ....
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.... the decision of Supreme Court in Mihir Textiles Ltd v. Collector of Customs, Bombay, 1997 (92) E.L.T. 9 (S.C.). In that case, concessional tariff was claimed under Tariff Heading No. 84.66. The proviso thereto is more or less the same as Note 2 of Chapter 9801. The Supreme Court analyzed the proviso and held as follows: "The proviso prescribes, principally, three conditions to be satisfied for entitlement of the concessional rate shown in the aforesaid entry. They are - (1) Goods should have been imported against a specified contract registered with the appropriate Customs House; (2) Such registration should have been made in the manner prescribed by the regulations; (3) Registration of the contract should have been obtained before the order (granting permission for clearance of the goods) was passed. Unless all (the three conditions are satisfied, no importer can claim, as a matter of right, the concessional relief provided in the Entry. In these cases the contracts were not registered at all before the order of clearance was passed. That fact is not disputed before us and as the appellants were aware of position they chose to pay full Cus toms duty for making the clearance." ....
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....ed for setting up the wind energy based power plant. That is a matter which primarily has to be addressed by the sponsoring authority while preparing and approving the list. The second point which we would like to clarify to obviate possible controversy, is that the expression 'deed of contract' should not be narrowly construed as applicable only to a formal document styled as agreement or contract incorporating all the terms and conditions governing totality of supplies made from time to time. Contractual documents normally exchanged between buyer and seller in commerce such as order and acceptance containing sufficient particulars of the transaction can also be treated as 'deed of contract'. QUESTIONS 2 (a) &(c) : 12. They are in a way linked with the answer to question No. 1. Where the imports fall under Tariff Heading No. 9801, the two notifications, namely 21 /2002-Cus. dated 1-3-2002 and 20/2006-Cus. dated 1-3-2006 would come into the picture and enure to the benefit of the applicant in regard to the basic duty leviable under Section 2 read with the First Schedule and the additional duty leviable under Section 3(5) of C.T. Act. 12.1 The relevant portion of the Notifi....
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....n No. 21 /2002-Cus. Having claimed the benefit of reduced basic customs duty in relation to such project imports, it is not open to the applicant to fall back on some other notification in so far as the additional duty on some of the goods is concerned. 13.1 In order to appreciate the controversy, let us take stock of the relevant provisions. We have already referred to Notification No. 21 /2002-Cus. at Paragraph 7.2 supra and again while answering the question No. 2(a). The basic or standard rate of duty specified by the said notification in respect of goods required for power generation projects etc. falling within Chapter 9801 is 5% and the additional duty specified is 16%. The basic duty and additional duty in excess of the aforementioned rates stand exempted under the said notification. If the matter stood there, there would be no difficulty in holding that the additional duty exemption cannot go beyond 16%. But, the answer to the question cannot be found within the four corners of this notification. Primarily, we have to see the charging section governing the additional duty. 13.2 Section 3(1) of the Customs Tariff Act in so far as relevant for our purpose is as follows....
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....toms Tariff Act, 1975 arises on the import of the articles into India it does not necessarily mean that the Customs Tariff Act cannot provide for the charging of a duty which is independent of the Customs duty leviable under the Customs Act." In Paragraph 17, it was observed: "…….On a correct interpretation of the relevant provisions of the two Acts there can be no manner of doubt that additional duty which is levied under Section 3(1) of the Tariff Act is independent of the Customs duty which is levied under Section 12 of the Customs Act The character and object of additional duty under Section 3(1) has been explained as follows : "…….Even though the impost under Section 3 is not called a countervailing duty there can be little doubt that this levy under Section 3 is with a view to levy additional duty on an imported article so as to counter-balance the excise duty leviable on the like article indigenously made. In other words Section 3 of the Customs Tariff Act has been enacted to provide for a level playing field to the present or future manufacturers of the like articles in India". 14. It is thus settled by the decision of the Supreme Court in Hyderabad I....
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....rom so much of the duty of excise specified thereon under the First Schedule to the Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions specified in the Annexure to this notification, and condition number of which is referred to in the corresponding entry in column (5) of the Table aforesaid: Table S. No. Chapter or Heading or sub-Heading or Tariff Item of the First Schedule. Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) --- ------ ------ ---- ---- 84. Any Chapter Non-conventional energy devices/systems specified in List 5 Nil ---- --- ---- ------- ---- ---- LIST 5 ……….(13) Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller……'" 14.3 On a reading of Item 13 of List 5, it is clear that not merely the generator (wind operated) but also its components and parts including rotor and wind turbine controller quality for exemption. Wind operated electric....
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....d in the notification which is in the nature of subordinate legislation cannot be projected into Section 3(1) if the article is otherwise not chargeable to duty under the charging section itself. 16. What follows therefore is this: If all or some of the articles imported under Chapter 9801 in accordance with Project Import Regulations fall within the description of wind operated electricity generator, its components and parts mentioned in List 5 (Sl. No. 84) appended to Central Excise Notification No. 6/2006, the importer will be out of the net of additional duty imposed by Section 3(1) of C.T. Act. Can it be said in the instant case that the goods proposed to be imported do not fall within the description of components and parts of wind operated electricity generator? If the answer is in the negative, as it ought to be, there is no way by which the importer can be denied the benefit of exemption. The goods required for power generation project may be of wider range and sweep than the wind operated electricity generator and its components and such goods may not qualify for exemption under the Central Excise Notification No. 6/2006. But, that cannot provide a legitimate ground to....
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....ues to the importer by the application of the criterion or measure provided by the section itself i.e. Section 3(1) read with the Central Excise notification. In the case of (b), the benefit of lesser rate of 16% accrues by virtue of Notification No. 21/2002-Cus. issued under Section 25(1) of the Customs Act. But for this notification, some of the goods required for power generation projects if manufactured in India would have attracted Central Excise duty at a rate higher than 16%. 18. There is no legal bar to the importer getting the benefit of duty relief/concession under two different provisions. On the other hand, if the benefit is denied to the importer on the ground that for some of the goods specified in the same heading partial relief has been granted under a Customs notification, it would amount to ignoring the mandate of charging Section 3(1) and placing the notification on a higher pedestal. The fact that the goods in question form part of the project import series is not a ground to avoid application of the criterion prescribed by Section 3(1). 19. As already noted, according to the learned Departmental Representative, the entirety of imported goods falling un....
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....ble advantage if that can reasonably be spelled out of an enactment". In Hughes's case, the contention of the Revenue that the assessee cannot get double advantage by getting the benefit of exemption under a particular provision and at the same getting the advantage of deducting the expenses attributable to the earning of the exempted income, was rejected, on the plain language of the relevant section. 21. The issue can also be examined from the point of view of the objective of the section and the notification. The object of Section 3(1) of C.T. Act as clarified by the Supreme Court is to counter-balance the impact of excise duty that would fall on Indian manufacturers. The idea is to subject the imports to the additional duty equal to the Central Excise duty leviable for the time being on similar goods manufactured in the country. At the same time, it is not the intention of the legislature that the additional duty should be paid on the imported articles irrespective of the fact that similar articles manufactured in India are exempt from central excise duty. The objective behind the Central excise notification was to provide incentives to those setting up non-conventional ener....
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....tification 62/83 as rightly held by the Division Bench." No such situation as pointed out by the Supreme Court arises here. 23. Another decision relied upon by the learned Departmental Representative is that of the CESTAT, South Zonal Bench reported in 2006 (203) E.L.T. 287. 23.1 The question there was whether the 'steam turbine' can be brought within the ambit of item 16 of List 9 of a similar C.E. notification. It was held that steam turbine by itself does not produce energy and therefore do not fall within the description 'waste conversion devices producing energy'. Item 13 with which we are concerned is of wider import. As already noticed, not only the finished product namely, wind operated electricity generators but also its components and parts including rotor and wind turbine controller are specifically mentioned. As regards the observations of the learned Tribunal that wherever the legislative Authority intended to give liberty to an importer under any exemption notification of their choice, such intent would have been expressed explicitly, we must say that it is too broadly stated. The Tribunal was interpreting a notification which specifically enabled the importe....