By TIOL News Service

MUMBAI, OCT 28, 2013: IN terms of Notification 6/2006-CE dated 01.03.2006 excisable goods supplied against International Competitive Bidding are chargeable to Nil rate of duty subject to their satisfying the following condition -

"If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India."

Incidentally, column no. 2 of the Table to the notification titled "Chapter or heading or sub-heading or tariff item of the First Schedule "mentions "Any Chapter" and the column no. 3 titled "Description of excisable goods" mentions "All goods supplied against International Competitive Bidding". There is no mention whatsoever of documents, if any, to be enclosed by a manufacturer so as to evidence that the goods are being cleared against International Competitive bidding. Likewise, the condition to the notification, as reproduced above, does not warrant the manufacturer to mention as to which is the Customs Tariff Notification that exempts "these" goods when imported into India.

In such a scenario, it is no surprise if the departmental officers start questioning the exemption availed by the manufacturers on a variety of grounds. One such instance is seen in the present case.

The brief facts of the case are that M/s Jindal Power Ltd. got a contract for setting up '4 x 250 Mega Watt Super Thermal Power plant' in the State of Chattisgarh. The applicants are engaged in the manufacture of transformers and supplied the same to Jindal Power Ltd. as a sub-contractor by availing the benefit of notification 6/2006-CE.

A show-cause notice was issued to the appellant in July 2010 demanding duty for the period 2006 to 2007 by denying the benefit of the Notification on the ground that the applicant suppressed the material facts with intent to evade payment of duty inasmuch as the Project Authority Certificate has been issued under clause 8.2 (g) of Chapter 8 of the Foreign Trade Policy and not under clause 8.2 (f) of the said Chapter/Policy; that Jindal Power Ltd. was not entitled for the benefit of Customs Notification no. 21/2002-Cus and in view of this position, the appellantis not entitled for duty-free clearance under Notification 6/2006-CE dated 1.3.2006.

A demand of Central Excise duty of Rs.3,95,07,391/-, interest and penalty came to be confirmed by the CCE, Mumbai-III. Two other demands issued to the appellant with similar allegations also met the same treatment of confirmation along with imposition of penalties and interest.

While seeking stay, the appellant submitted that on 3.3.2006 they wrote a detailed letter to the Revenue seeking guidance for clearance of the goods under Notification 6/2006-CE and the Revenue replied to the same that they are entitled for the benefit of the Notification subject to the fulfillment of the condition. Thereafter, the applicant cleared the goods during the period 2006-2007 to Jindal Power Ltd. by availing the benefit of Notification no. 6/2006-CE. Inasmuch as the demand notice issued in July, 2010 alleging suppressionis time barred. It is further submitted that as per the provisions of Customs Notification 21/2002-Cus, all the goods required for setting up of any Mega Power Project so certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power are exempted from payment of Customs duty; that since in the present case the goods were cleared for Mega power project and are exempted under Notification no. 21/2002-Cus, when imported into India, therefore, the applicant fulfilled the condition imposed under Notification no. 6/2006-CE.

The Revenue representative relied upon Chapter 8 of the Exim Policy of 2004-2009 to say that Jindal Power Ltd. is not entitled for import of goods without payment of duty, therefore, the conditions of Notification 6/2006-CE are not fulfilled, and hence the demand is rightly made; that clarification was sought from Jindal Power Ltd. and when they informed that the certificate is issued under clause 8.2(g) of Chapter 8 of the Exim Policy and since the conditions are not fulfilled the demand is rightly made. It was also submitted that all the facts were not brought to the notice of the Revenue.

The Bench while granting stay observed that the Customs Notification 21/2002-Cus does not provide any condition that the benefit is available subject to the provisions of the EXIM Policy and in the absence of such a condition, the appellant had a prima facie case on merits as well as on time-bar. See 2012-TIOL-574-CESTAT-MUM.

The appeal was held recently.

The Bench extracted the relevant entry of Notfn. 6/2006-CE & 21/2002-Cus and observed -

“5. We find that in the present case there is no dispute that the goods are required for setting up of a mega power project and a certificate to that effect has been issued by the Joint Secretary to the Government of India in the Ministry of Power. Further, the certificate has also been issued to the effect that the power purchasing State has constituted the Regulatory Commission with full powers to fix tariffs and the power purchasing State undertakes, in principle, to privatize distribution in all cities in the State, each of which has a population of more than one million, within a period to be fixed by the Ministry of Power. The other certificate that is required in this case is covered by clause (c) of condition 86. As per the said clause, the Chief Executive Officer of such project has to certify the quantity, total value, description and specifications of the goods. It is in respect of this certificate that the Revenue is objecting. We have gone through the order-in-original. We find that the appellants have produced certificates to that effect from Shri Rajeev Jain, Senior Manager of the Project Authority. The relevant portion of the certificate is as under:-

“It is certified that:

(a) to (d) ………….

(e) The supply of the goods under the contract to be made to the power project in India is under the procedure of International Competitive bidding in accordance with the provisions of paragraph 8.2 (g) and 8.4.4 (iv) of the Policy 2004-09 and that the import content of the order is Rs.10,61,43,150.00.

(f) to (j) ……….

2.* It is further certified that the contract No.JPL/4x250MW/DIST-TRANS/VJ/001 dated 19.05.2005 in respect of power transformer package for O.P. Jindal Raigarh Super Thermal Power Project has been awarded to M/s. Crompton Greaves Limited as the Indian Main Contractor……

*Relevant only for contract at Paragraph 1(a), (b), (c), (d), (e), (f), (g) and (h) for which Annexure-I to Appendix-27 be furnished.

3. …..”.

It would be seen from the above certificate that at serial No.2, the certificate required as in clause (c) above mentioned, is covered. The portion mentioned at serial No.1 is not relevant for availing the benefit of Notification 6/2006-CE read with Customs Notification 21/2006. (sic) We are of the view that whatever has been stated at serial No.1 of the certificate is not relevant for granting the benefit of Exemption Notification and is relevant only for the purpose of Foreign Trade Policy.”

So also, after extracting the relevant part of clause 8.2 of the FTP, the Bench observed -

“…A bare reading of the above clause (f) would indicate that supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits import of such goods at zero percent duty, is given the benefit of deemed export. Further, clause (g) states that the supply of goods to power projects and refineries even if not covered by clause (f) above will get the deemed export benefit. We are, therefore, of the view that clause (e) or clause (g) is relevant for granting the deemed export benefit and has no relevance whatsoever for granting exemption under Notification 6/2006-CE.”

Holding that the benefit of the exemption notification 6/2006-CE has been correctly availed by the appellant, the orders confirming the duty liability and imposing penalties and interest were set aside and the appeals were allowed.

Also see -

++ Cords Cable Industries Pvt. Ltd. - 2011-TIOL-1786-CESTAT-DEL

++ Kent Introl Pvt. Ltd. - 2012-TIOL-537-CESTAT-MUM

(See 2013-TIOL-1595-CESTAT-MUM)