TaxTMI 
TaxTMI 
2004 (9) TMI 278
X X X X Extracts X X X X
X X X X Extracts X X X X
....ufacturing the same, would not be eligible for exemption from duty under Notification No. 21/2002 as because the same not classifiable under Chapter Heading 98.01. I, therefore order that "Ductile pipes" are not classifiable under heading 98.01 of Customs Tariff and thus the importer is not eligible for the exemption Notification No. 21/2002-Cus., dated 1-3-2002. I, therefore, reject the application for registration under project import filed by the said importer in Jawarlal Nehru Customs House, Nhava Shava." 2. The Commissioner (Appeals) vide order dated 30-4-2004 after considering the issues & hearing the importer held - "I have gone through the fact of the case and the submission made in the grounds of appeal as well as at the time of personal hearing. I find that the lower authority has observed that the ductile pipes are not classifiable under heading 98.01 of Customs Tariff and thus not eligible for the exemption under Notification No. 21/2000 are dated 1-3-2002. I find that pipes not being items in the nature of machinery/equipments or components for manufacture the same, do not appear to be covered under heading 9801 of the Customs Tariff and are not el....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he imported pipes are to be used for the drinking water supply project, and the pipes are an integral part of the project. The appellants are relying on Tribunal decision in case of K.M. Sugar Mills v. Commissioner of Customs - 2000 (119) E.L.T. 170 (Tri.) in which the appellants were allowed benefit of project import benefit to empty gas cylinder used in for setting up plant for manufacture of oxygen gas being in the nature of "authority equipment". The reason was that without a pipe line or cylinder, neither storage of gas produced nor supply is feasible. I find the ratio of the said decision is applicable to the present case, the lower authority is relying upon some case of Kolkata Municipal Corporation in which they were allowed 'nil' duty benefit under ad hoc Exemption under Section 25(2) of the Customs Act, 1962. I find that prevailing judicial decision has not been considered in this case, so the same is not applicable here as in the present case the appellants are claiming the benefit of project import heading 98.01. The two case are different. The appellants contention is that a number of pipeline projects have been notified under clause (6) of heading 98.01. It is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this very chapter 98 stipulates that heading 9801 is to be taken to apply to goods which are imported in accordance with the Regulation made. These regulations are Project Import Regulations, 1986 (hereinafter referred as PIR). Therefore before even considering whether the entity is covered by CTH 9801 wordings, it is imperative to first determine whether the import per se was effected as per the PIR. (a2) Examining the stipulation of PIR, it is found - (i) There are in all seven regulations, regulation 1 is the title clause, Regulation 2 specify that PIR applies to assessments & clearance of goods under 9801. Regulation 3 is the definition clause & definitions herein are to be adopted vide note 2 to Chapter 98 to apply to expressions used in Heading 9801. Regulations 4 & 5 reads as - "4. Eligibility. The assessment under the said heading no. 98.01 shall be available only to these 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 & each such contract or contracts has or have been so registered, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollows - ................the ductile Iron/pipes imported and supplied to them by supplier/importer as above shall be used only for the intended purpose of setting up of drinking water supply to make water suitable for human/animal consumption......." (underlining supplied) & especially the underlined position of intended purpose of setting up of drinking water supply would cause the declaration of initial setting up "as declared, in the application to be correct. However from the map and plans which were shown to us during the hearing, were showing the intent of the said imported pipes to be used in Zone 7 map plan which has legend on the side of it declaring the said map plan to be for as "Improvement to Chandrapur water supply scheme." The map plan was explained to us, denoting existing water distribution arrangements with a specific marking of a line, showing proposed improvement or expansion of the existing water supply system in situ in Chandrapur. 'Improvement' can't be 'initial setting up' as declared. One can improve by augmenting altering what already exists. A water supply system as per this map/plan in Chandrapur already exists. S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial 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 consumable stars are essential for the maintenance of the plant or project mentioned in (1) to (6) above." A plain reading of this heading, would permit as eligible all items in nature & component & parts thereof provided they are required for initial setting up 'of a unit' or the substantial expansion of an existing unit of Drinking Water Supply Projects for supply of water for human or animal consumption. All unit entities such would be covered under 9801.00.19 components or raw material, would fall under 98.0020 & spare parts would fall under 98.0030. (d) The concept of 'unit' project specified has to limited and understood as per chapter note 2 to chapter 98 by the definition in Regulation no. 3 of PIR which reads as - "Unit means any self contained portion of an industrial plant or any self contained portion of a project specified under such heading no. 9801 and having an independent function in execution of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as parts/components or equipment to lay additional pipelines to distribute in an improved manner the water to improve the system existing. The use in any manner in a Treatment Plant, could not be shown. There is no sponsorship certificate to cover such use. Eligibility under heading 9801 is not available. (f) The plea of the ld. Sr. Advocate, for the respondents in C/678/04 that the entities have been upheld to be Auxiliary Equipment by CC (Appeal) & reliance on K.M. Sugar Mills - 2000 (119) E.L.T. 170 & the decision in the case of EID Parry - 1998 (100) E.L.T. 275 & Other cases will not help the imports being cleared under Heading 98010019, as on facts they are not found to be and admitted to not for use in any Water Treatment Plant Unit but are to be used as and in Water Distribution Improvement Scheme. No findings are therefore required whether they are auxiliary equipments as auxiliary equipment of a non notified unit, can not classified under chapter 98 & get registered under PIR. (g) As regards appeal (C1692104), from the PIR registration application made, it is apparent that the request is to register a project "FOR WATER TREATMENT LANT FOR THE WORK OF 84 V....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... law on the subject is that classification cannot be arrived at by looking at notifications of exemption of duty. However we find that the grant of exemption under Section 25(2) in exercise of powers of the Government & when read with the scope of the Finance Ministers Budget speech & the Boards classification & fact that on Central Excise side, exemption to such pipes used anterior to Water Treatment Plant stage have been specifically granted, we find reason to conclude, that pipe lines for transfer from source of water to Water Treatment & thereafter use in transfer distribution net work of drinking water are not covered by PIR & or chapter 9801. Discretion of the Government to notify a project under 9801 cannot be challenged before us. (j) The reliance of the ld. Advocate for the appellant in C/6 92/04, on the case of Kerala State Electricity Board - 2002 (142) E.L.T. 278 (S.C.) will not help them. That was a case to intercept the word 'Power Project' as it appears in the tariff heading itself. It was not as per a notification issued by the Government. The intention to limit the notified project can be derived from the Finance Minister's Budget speech & the ....