By TIOL News Service

MUMBAI, MARCH 13, 2019: BY denying exemption under notification no. 21/2002-Cus [Serial no. 230, List 18] in the import of "Rotary piling rig R-625 serial no. 2553 and its accessories",the Commissioner of Customs (Imports), Mumbai ordered confiscation of the goods(but permitted the same to be redeemed on payment of fine of Rs. 90 lakhs) while also ordering recovery of Customs duty of Rs. 1,35,08,850/- that was foregone at the time of import and imposed penalty of like amount on the importer. Penalty of Rs. 5 lakhs was imposed on R.P Singh, Deputy General Manager and Rs. 1 lakheach on M/s Batliboi Impex Ltd and National Highway Authority of India.

Appeals have been filed before the CESTAT against this order.

The appellant submitted that intended for utilization in construction of roads the notification at serial no. 230 exempts machines and equipment specified in list 18 appended therein intended for utilization in construction of roads from duty subject to prescribed conditions. It was also submitted that, at the time of importation, an undertaking to use the goods exclusively for construction of roads and that it would not be parted with for a period of five years from the time of importation had been furnished to the customs authorities. It was further submitted that the imports were effected on the appellant- importer being awarded the contract for 'six laning' of Panchi Gujaran to Panipat section of National Highway no.1 in Haryana and that the imported goods had been sent to Patna for executing a project pertaining to construction of 'rail over bridge' as the site for 'six laning' had not been made available for commencement of execution of the contract awarded to them.

Justifying the denial of the notification, the AR submitted that it was incumbent upon the importer to deploy the imported equipment on the project for which the goods were claimed to have been imported; that the transfer to the site of the Patna project was pre-meditated and in breach of their undertaking to utilize the equipment at Panipat; that the project for construction of 'rail over bridge' is not one of the works awarded by Ministry of Surface Transport, National High Authority of India, Public Works Department or Road Construction Corporation in the State of Bihar which alone would entitle the importer for the benefit of the exemption. Reliance is placed on the decisions in Patel Engineering Ltd - 2012-TIOL-2027-CESTAT-MUM [upheld by Supreme Court] & in Shreeji Construction 2013-TIOL-441-CESTAT-MUM, Rajhoo Barot - 2015-TIOL-244-CESTAT-MUM and Gammon India Ltd - 2011-TIOL-60-SC-CUS.

The Member(Technical) writing for the Division Bench in his inimitable style distinguished all the case laws cited by the AR and inter alia observed –

+ …we must look to the contents, and purpose of the exemption notification itself.

+ It is apparent that the sheer scale of investment involved in undertaking road connectivity projects through participation of the private sector did warrant, and prompted, public contribution through exemption from duties of customs on import of equipment that is intended to be deployed.

+ The eligible goods are specifically enumerated and it is not in dispute that the impugned goods are not ineligible.

+ …the privilege of exemption is subject to utilization in road development project undertaken by the State or specified instrument of the State and retention with the importer for five years.

+ Such projects are awarded in portion to contractors and it is not anybody's case that the equipment will find full employment during the execution of the project in entirety.

+ The idling of such resources is as much of a waste as a national loss.

+ The only construction of intent that can be inferred from the structure of the exemption notification is that pre-importation condition entitles the importer to availment of the exemption while the post-importation condition mandates performance; these are mutually exclusive conditions.

+ It is not in dispute that the appellant-importer had been awarded with such an eligible contract. The threshold eligibility is thus not contestable.

+ The notification does not stipulate exclusive use in the project that evinces compliance with pre-importation condition. Deployment in other projects undertaken for the enumerated instruments of the State, as well as on construction of other roads, suffices for compliance with the post-import condition.

+ The appellant was prevented from executing the project at Panipat for want of the project site being made available to them. In these circumstances, the pre-importation condition, which is neither included in the undertaking for continuing obligation under the notification nor mandated to be so in the notification, cannot be held to have been deniable after the eligibility was determined at the threshold. Consequently, there is no breach leading to invokability of section 28 of the Customs Act, 1962 and/or section 111 of the Customs Act, 1962.

+ The post-importation deployment does not necessarily have to relate to contracts that confer eligibility at the threshold. Hence, execution of project contracted by Indian Railways, or any agency of the Government of Bihar, is not violative of the continuing obligation undertaken by appellants or mandated by the notification except where the project did not involve construction of roads.

+ 'Rail over bridge' connects two sections of a road to overcome the impediment of a railway track on the proposed route; it connects and continues the road itself, save that it is not constructed on level ground but rests on supports.

+ The involvement of Ministry of Railways is essential as any crossing over a railway thoroughfare is statutorily under the exclusive domain of that authority and thus not incongruent with non-railway thoroughfare. That girder(s) connect both ends and that other structures are essential to the execution does not derogate from the essential purpose of being road connectivity.

Concluding that the exemption had been correctly availed, the impugned order was set aside and the appeal was allowed.

Quick reference: Notification 21/2002-Cus. Extracted -

List 18 (See S. No. 230 of the Table)

(1) Hot mix plant batch type with electronic controls and bag type filter arrangements more than 120 T/hour capacity

(2) Electronic paver finisher (with sensor device) for laying bituminous pavement 7 m size and above

(3) Slip form/fixed form paver finisher for laying concrete pavement

(4) Surface dressing equipment (self propelled) (chips spreader)

(5) Slurry seal machine for filling up cracks in roads

(6) Kerb laying machine

(7) Mobile bridge inspection unit

(8) Mechanical broom with blower

(9) Toll collection and traffic control equipment

(10) Electronic Total station instrument for topographic survey

(11) Global Positioning System (GPS) Instrument

(12) Stone crushing (cone type) plants

(See 2019-TIOL-762-CESTAT-MUM)