Commissioner of Customs (Import) Vs Maharashtra Eastern Grid Power Transmission Company Limited (MEGPTCL) (CESTAT Mumbai)
Held that department failed to brought on record independent evidence showing that the price of imported goods were over-valued. Accordingly, in the absence of contemporaneous imports, the transaction value cannot be discarded.
Facts-
The main issue in this appeal relates to the allegation of overvaluation of the goods that were imported for the purpose of setting up Transmission Lines and Substations in the State of Maharashtra.
The State of Maharashtra was facing acute power shortage with a deficit of approximately 17.5% and a peak deficit of 4700 MW. After a detailed study, a new company called MEGPTCL was formed, which is a Special Purpose Vehicle, for the development of 765 KV intra-state transmission system.
Post completion of investigation, DRI issued show-cause notice on 15.05.2014 alleging that declared value of equipment and machinery imported under various BOE should be rejected; goods covered under various BOE should be confiscated and penalties under various sections should be imposed.
The adjudicating authority vide order dated 18.10.2017 dropped all the proceeding initiated against the respondents.
Conclusion-
Held that no evidence was brought on record to show that the transaction value of the goods was influenced by the alleged relationship between EIF and PMC. The contract was awarded to the PMC led Consortium by MEGPTCL after following the International Competitive Bidding process. The said bids were independently evaluated by an expert of Price Waterhouse Coopers. Both Transmission Line and Substation projects bids submitted by PMC led Consortium were found to be the lowest. The Department should have brought on record independent evidence in the form of contemporaneous data to show that the price of the imported goods were over-valued.
Hon’ble Supreme Court in the case of Commissioner of Customs Vs. South India Television 2007 has held that in the absence of contemporaneous imports, the transaction value cannot be discarded. The transaction value, therefore, has to be accepted and the question of redetermination of the value does not arise at all.
FULL TEXT OF THE CESTAT MUMBAI ORDER
The Commissioner of Customs (Imports), Maharashtra 1 has filed this appeal to assail the order dated 17.10.2017 passed by the Additional Director General, DRI (Adjudication), Mumbai2 by which the proceeding initiated against the respondents by the show cause notice dated 15.05.2014 has been dropped.
2. The main issue in this appeal relates to the allegation of overvaluation of the goods that were imported for the purpose of setting up Transmission Lines and Substations in the State of Maharashtra.
3. The two main respondents in this appeal are Maharashtra Eastern Grid Power Transmission Company Ltd. 3 , which has been arrayed as respondent no. 1 and M/s. PMC Projects (India) Pvt. Ltd.4, which has been arrayed as respondent no. 2.
FACTS
4. The State of Maharashtra was facing acute power shortage with a deficit of approximately 17.5% and a peak deficit of 4700 MW. In order to overcome this deficit and to meet the future requirements, the Government of Maharashtra encouraged private sector participation in power generation, transmission and distribution. Number of private players came forward and began setting up Thermal Power Generation Plants in the State of Maharashtra. Adani Power Maharashtra Limited5 was in the process of setting up a coal based power project at Tiroda in the State of Maharashtra with a generation capacity of 3300 MW. Taking into consideration the huge transmission network requirement for evacuation of power from the power stations, and to implement the setting up of the power station, Maharashtra State Electricity Transmission Company Limited 6 considered various options such as Build, Operate and Transfer7 as well as Build, Own and Operate 8 through Joint Venture route or Independent Private Transmission Company route. After a detailed study, a new company called MEGPTCL was formed, which is a Special Purpose Vehicle9, for the development of 765 KV intra-state transmission system comprising of 2 x 765 KV S/C Tioda – Koradi – Akola – Aurangabad Transmission Lines along with associated Sub-stations and bays for evacuation of power from projects in north-eastern Maharashtra. The SPV was proposed to be a Joint Venture company between Adani Enterprises Limited10 and MSETCL, where AEL proposed to hold 74% equity share and the balance share of 26% with MSETCL.
5. MEGPTCL made an application dated 17.02.2010 to the Maharashtra Electricity Regulatory Commission11 under section 14 of The Electricity Act, 2003. AEL, by its letter dated 01.07.2010, requested MSETCL to convey it’s no objection to MERC in favour of the proposed Joint Venture, so as to enable MEGPTCL to complete the regulatory process and initiate implementation activity, including the International Competitive Bidding process. The said letter made it clear that on receipt of approval from Government of Maharashtra, MSETCL will take 26% equity in MEGPTCL. MSETCL provided the no objection certificate to MEGPTCL on 02.07.2010, which thereafter opted for the International Competitive Bidding route and issued two separate tenders for the appointment of engineering, procurement and construction 12 contractors for Transmission Line and Substation packages. A Notice Inviting Tender was issued for Supply, Erection and Testing, and Commissioning of Tiroda-Koradi-III-Akola II-Aurangabad Transmission Line and another Notice Inviting Tender was issued for Design, Supply, Erection and Testing, and Commissioning of Substations, including Auto Transformers and Shunt Reactors associated with Substations at Tiroda, Koradi, Akola and Aurangabad. The tenders were published in the newspapers on 05.08.2010. To ensure maximum participation in the tender process, notices were also sent to twenty seven embassies for inviting bids.
6. PMC, Electrogen Infra FZE 13 and Hyundai Heavy Industries formed a consortium to bid for the Substation project and an agreement was entered between the three on 16.08.2010. Similarly, PMC, EIF and Gammon formed a consortium to bid for the transmission project and an agreement was entered between the three on 17.08.2010.
7. In the meantime, MEGPTCL was granted the Transmission License by order dated 14.09.2010 issued by MERC for the development of 765 KV Intra-State Transmission Network in the State of Maharashtra.
8. PMC along with its Consortium Partners emerged as the successful bidder for both the Transmission Line and the Substation project on 21.09.2010, based on the technical evaluation carried out by Price Waterhouse Coopers Pvt. Ltd.
9. Thereafter, MEGPTCL issued a Letter of Intent dated 23.09.2010 to the Consortium comprising PMC, EIF and Gammon India Ltd. for the Supply, Erection and Testing and Commissioning of Tiroda-Koradi-III-Akola II-Aurangabad Transmission Lines. A letter of Intent dated 23.09.2010 was also issued to the Consortium comprising PMC, EIF and Hyundai Heavy Industries for Design, Supply, Erection and Testing and Commissioning of the Substations, including Auto Transformers and Shunt Reactors associated with the Substations at Tiroda, Koradi, Akola and Aurangabad.
10. Two separate Purchase Orders, both dated 27.09.2010, were then placed by MEGPTCL on PMC (lead member of the Consortium) for the Transmission Line and Substation package. To execute the said
Purchase Orders, PMC entered into the following agreements:
a. Agreement dated 28.09.2010 with ABB Limited for supply and service for the Substations;
b. Agreement No. 415703 dated 01.10.2010 with EIF for supply of transformer, reactor, insulator and OPGW;
c. In addition to the aforesaid contracts, PMC also entered into contracts with various suppliers / contractors for the local supplies / services:-
i. With Apar Industries Ltd., Sterlite Technologies Ltd., Gupta Power Infrastructure Ltd. and JSK Industries Ltd., Gammon India Ltd. for conductors;
ii. With Asbesco Industries Ltd. and Tag Corporation Limited for supply of hardware materials; and
iii. With UIC Industries Ltd for supply of ground wire.
d. PMC also entered into contract with A2Z Maintenance and Engineering Services for ETC works, local transportation and local services for transformer and reactor.
11. The role of EIF included procurement of transformers and reactors from Hyundai, insulators from Dalian Insulator Group Company Ltd. and Sediver Insulators (Shanghai) Co. Ltd., and optical fiber ground wire from Suzhou Furukawa Power Optic Cable Co. Ltd. EIF was also responsible for type-testing of the equipments so procured. EIF also undertook the responsibility of giving extended warranty of 10 years for critical and high value equipments such as transformers and reactors. The role of Hyundai was to supply transformers and reactors to EIF.
12. By a letter dated 03.03.2011, MEGPTCL requested MSETCL to communicate its approval to the various proposals made in the said letter, including nomination of Directors, even though the proposal to form a Joint Venture between AEL and MSETCL was under active consideration of the Government of Maharashtra. A letter was also written by MEGPTCL to MSETCL on 23.09.2010 to take up the issue of approval of the Joint Venture with the Government of Maharashtra at the earliest.
13. In terms of Serial No. 424 of the General Exemption Notification dated 01.03.2002, High Voltage Power Transmission Project equipments were permitted to be cleared under concessional rate of customs duty. Thus, concessional rate of customs duty benefit was available for the 765 KV Auto Transformers, Shunt Reactors, Isolators and Surge Arrestors. In order to obtain the benefit of concessional rate of customs duty for the goods to be imported under the aforesaid Notification, MEGPTCL, based on the request made by PMC, submitted applications to the Principal Secretary, Energy Department, Maharashtra. In its applications, MEGPTCL, inter alia stated that PMC would be importing transformers with accessories and shunt reactors on behalf of MEGPTCL, as an EPC contractor, from EIF and would avail the exemption contemplated under the Notification. The details of some of the applications are as follows:
