TaxTMI 
TaxTMI 
2026 (9) TMI 1853
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....ed Yarn (POY), Fully Drawn Yarn (FDY), Draw Textured Yarn (DTY) and Chips in their factory situated Daman. For the purpose of such manufacturing activity, the appellant procures raw materials such as Purified Terephthalic Acid (PTA), Mono Ethylene Glycol (MEG), Spin Finish Oil, Titanium Di Oxide etc. locally as well as through import. Apart from these inputs, for manufacturing Polyester Filament Yarn (PFY) a number of machineries such as polycondensation plant, thermic fluid reactors, piping & vessels, machinery for paste preparation tank, Esterification reactors, Finishers etc., are essentially required. The appellant had imported Continuous Polycondensation (CP) Plant from overseas supplier M/s Oerlikon Barmag, without thermic fluid filled by using EPCG authorisation scrip/license No. 0330032343 dated 30.03.2012 during April, 2012 to July, 2012 for setting up CP plant in their manufacturing facility. Subsequently, the appellant had imported 3,01,296 kgs. of 'Dowtherm RP Heat Transfer Fluid' / 'Dowtherm A Heat Transfer Fluid' valued at Rs.9,86,65,178/- from M/s Dow Chemical International Private Limited, Switzerland vide Bills of Entry Nos. 8114446, 8117765, 8113786 all dated 03.1....
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....eved with the impugned order, the appellant has filed this appeal before the Tribunal. 3.1 Learned Advocate appearing for the appellant at the outset submitted that they had imported Polycondensation plant separately without thermic fluid; and 'Dowtherm RP Heat Transfer Fluid' / 'Dowtherm A Heat Transfer Fluid' thermic fluid separately, even though these are used together for operation of Continuous Polycondensation (CP) Plant in manufacture of Polyester Filament Yarn (PFY) and other final products. In explaining the usage of such thermic fluid by means of a flow diagram, he stated that these thermic fluid are one time charged into the thermic fluid heaters, piping and vessels of CP plant, and thereafter these continuously circulate in a closed loop from the heaters to the reactors and back for the polycondensation process for manufacture of polyester. In this process, the basic raw materials such as Purified Terephthalic Acid (PTA), Mono Ethylene Glycol (MEG) etc. are processed in a molten form, in order to enable final stages of polycondensation take place at temperatures between 270°C and 300°C under high vacuum; therefore, use of thermic fluids are critical for suppl....
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....C Circular No. 344/60/97-Customs dated 22.10.1997 In view of the above submissions, learned Advocate pleaded that the appeal filed by the appellant may be allowed. 4. Learned Authorized Representative (AR) for Revenue reiterated the findings in the impugned order and stated that the Commissioner of Customs had examined all the submissions made by the appellant in the impugned order and had come to the conclusion that the definition of capital goods as provided under Notification No.104/2009-Customs dated 14.09.2009, does not cover the impugned goods. Therefore, he pleaded that the appeal filed by the appellant may not be entertained. 5. We have heard both sides, examined the case records and the additional submissions made during the course of hearing, written synopsis along with case law citations in the form of paper books submitted by both sides. 6. The issue involved in the present appeal before the Tribunal is to decide whether the impugned order dated 07.10.2016 passed by the learned Commissioner of Customs, confirming the duty demands in respect of import of 'Dowtherm RP Heat Transfer Fluid' / 'Dowtherm A Heat Transfer Fluid' thermic fluid, by denying the exempti....
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....ent or accessories. It is admitted that the chemical is used indirectly in the manufacturing process, but not being in the nature of plant, machinery, equipment or accessories, it cannot be treated as capital goods. 39. It is also seen that thermic fluid cannot be treated as capital goods in terms of the second limb of the definition contained in said notification No.104/2009-Cus. which provides for inclusion of packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control under the definition of capital goods. 40. Therefore, I hold that the thermic fluid, classifiable under Chapter 29, presented as such before the Customs authorities for assessment, cannot be treated at capital goods on the ground that the fluids were eventually used for initial filing up of the polycondensation plant." 9. On perusal of case file, certain undisputed facts as highlighted by the learned Advocate for the appellant and not disputed by AR for the Revenue are summarised herein below: ....
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....in the Official Gazette." Foreign Trade Policy 27th August 2009 - 31st March 2014 "Interpretation of Policy 2.3 If any question or doubt arises in respect of interpretation of any provision contained in FTP, or classification of any item in ITC (HS) or HBP v1 or HBP v2, or Schedule of DEPB Rates (including content, scope or issue of an authorization there under) said question or doubt shall be referred to DGFT whose decision thereon shall be final and binding. CHAPTER 3 PROMOTIONAL MEASURES PROMOTIONAL MEASURES IN DEPARTMENT OF COMMERCE 3.14 Status Holders Incentive Scrip (SHIS) 3.14.1 Objective (a) Objective of SHIS is to promote investment in upgradation of technology. (b) Status Holders of sectors specified in Para 3.16.4 below, shall be entitled to a Duty Credit Scrip @1% of FOB value of exports made during 2009-10, 2010-11,2011-12 and 2012-13. (c) Status Holders of additional sectors listed in Para 3.10.8 of HBPv1 2009-14 (RE-2010) shall also be eligible for this Status Holders Incentive Scrip on exports made during 2010-11, 2011-12 and 2012- 13. (d) This shall be over and above any Duty Credit....
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....scharge any duty or function under the Act or the Rules and Orders made thereunder or under FTP." Notification No.104/2009-Customs, Dated 14.09.2009 as amended "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, [hereby exempts - (i) capital goods; and (ii) components and spares and parts, for capital goods imported earlier, when imported into India against a duty credit scrip issued under the Status Holders Incentive Scheme in accordance with paragraph 3.16 of the Foreign Trade Policy (hereinafter referred to as the said scrip), (a) from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), and (b) from the whole of the additional duty leviable thereon 2[under sub-sections (1), (3) and (5) of section 3] of the said Customs Tariff Act, 1975, subject to the following conditions, namely :- (1) that the said scrip has been issued by the licensing Authority to a status holder against exports of the products....
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....res that in order to carry out the purpose of FTP and to provide relaxation on the grounds of genuine hardship and adverse impact on trade and in public interest, DGFT is authorised to pass such orders for granting requisite relaxation or relief. Furthermore, in case of any question of doubt in respect of interpretation of any provision of FTP etc., the decision of DGFT thereon shall be final and binding. 11.2 The main ground on which the learned Commissioner had denied the exemption benefit of the notification dated 14.09.2009 in the impugned order is that the impugned goods are chemicals classifiable under Chapter 29 and such chemicals cannot be treated as capital goods; SION norms have mentioned the items Dowtherm (Therminol), Dowtherm (Heat Transfer oil) as inputs; and that the clarification of CBIC on 'transformer oil, is in respect of central excise matter. 11.3 The definition the phrase 'capital goods' as provided under the notification No. 104/2009-Customs dated 14.09.2009 and at Para 9.28 of the FTP are extracted and given below for comparison and better appreciation, to state that these are identical. Definition as per Notification Definition under FTP "Cap....
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....practical due to the massive pressures it would require in tanks, each of which is provided with stirring vanes and its power source and further provided with a distillation column or a condenser for separating and removing the byproduct. Furthermore, the polymerization steps are operated in a reduced pressure atmosphere, and thus the necessary additional vacuum means for generation of a reduced pressure is required. That is, the operation of the apparatus requires a higher maintenance cost and a higher apparatus cost. Therefore, use of thermic fluids in the Continuous Polycondensation plant enable higher efficiency throughout the apparatus and result in economical operation based on energy saving throughout the apparatus which is desirable for the production of high molecular weight polyester. Therefore, in our considered opinion the impugned goods fulfil the statutory requirements provided under the FTP for SHIS scheme. 11.5 On careful perusal of the definition of capital goods as provided under Para 9.28 of the FTP and notification dated 14.09.2009, it transpires that it refers to any plant, machinery, equipment or accessories required for manufacture or production of goods. ....
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....ed 14.09.2009. 12.1 We find that the Co-ordinate Bench of the Tribunal in the case of Reliance Communications Infrastructure Limited (supra) have held that Gas Suppression System is covered under the category of capital goods and allowed the benefit customs duty exemption under Notification No.97/2004-Customs dated 17.04.2004. The relevant paragraph of the said order is extracted and given below: "6. We have gone through the records of the case carefully. It is seen that the appellants applied for EPCG licence for import of, among other things, a Gas Suppression System. The purpose of the Suppression System is to detect smoke/fire and extinguish with the help of the gas. As outlined by the appellants, the entire system consists of several components including the impugned items viz. HFC 227 EA gas. The application of the appellant for grant of EPCG licence was scrutinized by a Committee consisting of the representatives of the DGFT as well as CBEC. The said Committee, in its wisdom, had permitted the issue of EPCG licence for the entire system. The said gas, which is the impugned item, is a part of the system. The Customs cannot dissect the system and say that one part ....
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.... is allowed in their favour. (Order pronounced in open court on 24.09.2026) ============= Document 1 L. R. D amania B. E. (Mech) MIE (INDIA) Chartered Engineer No. M 37274 Address : Mora Falia, Opp. Custom House, Phone : Resi. : 2254708 TO WHOMSOEVER IT MAY CONCERN 00 I have examined the Applicant Company's import requirements of Dowtherm RP and Dowtherm A (Thermic Fluids) with regard to their technical description/specification for the initial filling of their Continuous Polycondensation Plant at Daman for Heat Transfer purposes. Having due regard to proper technical scrutiny of relevant designs and drawings of the manufacturing products. I hereby certify that Thermic Fluids viz. Dowtherm RP and Dowtherm A imported by them under SHIS Scrips have actually been filled-in for the initial start-up of their various machines and Equipments on a one-time basis, required for heat transfer purposes and considered as Capital Goods for all purposes. Following are the techno-commercial findings of their usage, viz. i) Thermic Fluids are of petroleum origin, some are purecompounds and some in the form of mixtures of two or more compounds. These liquids give....