Case Law Details
RKM Powergen Pvt Ltd Vs Commissioner of Customs (CESTAT Chennai)
Introduction: In the case of RKM Powergen Pvt. Ltd. vs. Commissioner of Customs (CESTAT Chennai), a significant dispute arose regarding the eligibility of project import benefits for goods imported before the contract registration. This article delves into the details of this case, highlighting the key arguments and the final decision.
Detailed Analysis:
1. Background and Timeline: RKM Powergen Pvt. Ltd. applied for project registration under Project Import Regulations 1986 on August 23, 2010. They also submitted a sponsorship letter to the Customs authorities. Subsequently, on September 16, 2010, they filed a bill of entry in Chennai Customs House for goods related to the contract. The Customs department assessed these goods under a merit rate of duty.
2. Disputed Duty Payment: The appellant argued that they should be entitled to the concessional rate of duty because their import fell under the project scheme. They contended that their application for project registration was made well before the goods’ clearance, but the concession was denied as the contract had not been registered at the time of import.
3. Legal Arguments: The appellant’s counsel cited legal precedents that supported their claim, emphasizing that project import benefits couldn’t be denied solely because goods were imported before contract registration. They referred to the case of M/s. Flance Proof (Gears) Ltd. vs. CC, Bombay, and DPS India Pvt. Ltd. vs. Collector of Customs, which upheld the benefit of project imports in similar situations.
4. Evidence of Sponsorship Letter: During the tribunal hearing, evidence was presented regarding the issuance of the sponsoring authority’s letter and its receipt by Customs. A letter from the sponsoring authority dated August 25, 2010, was dispatched directly to the Additional Commissioner of Customs, Chennai. This evidence demonstrated that the sponsorship process had begun prior to the importation of the goods.
Conclusion: After considering all arguments and evidence, the tribunal concluded that the appellant was eligible for the benefit of duty exemption under project import for the goods cleared before contract registration. They cited relevant legal precedents to support their decision.
Final Thoughts: The RKM Powergen vs. Commissioner of Customs case underscores the importance of timely documentation and communication with Customs authorities when seeking project import benefits. It reaffirms that project import benefits should not be denied solely on the grounds of goods being imported before contract registration.
FULL TEXT OF THE CESTAT CHENNAI ORDER
1. Brief facts are that the appellant namely M/S. RKM Powergen Pvt. Ltd. vide letter dated 23/08/2010 requested the Assistant Commissioner of Customs (Project Import), Visakhapatnam Customs for registration of project under Project Import Regulations 1986. They obtained acknowledgement from the department for having received the application for registration of the project. Meanwhile, they filed bill of entry dated 16/09/2010, in Chennai Customs House for the clearance of certain goods forming part of the contract. The goods were assessed by Customs department classifying them under CTH 73089090 and the appellant was directed to pay merit rate of duty. The contract was later registered by Visakhapatnam Customs on 6/12/2010.
2. The appellant was aggrieved that they were required to pay the duty on merit rate without considering that the import is under the project scheme. Though they had requested for registration of project on 23/08/2010 much before the clearance of the goods, the concession in payment of duty was not granted on the ground that the contract had not yet been registered. After due process of law, the original authority held that as the contract was not registered at the time when the goods were imported, the benefit of concessional rate of duty cannot be extended to the goods. The appellant filed an appeal before the Commissioner (Appeals) who vide order impugned herein, upheld the view taken by the original authority. Hence this appeal.
3. The Ld. counsel Shri Hari Radhakrishnan appeared and argued for the appellant. It is submitted that the appellant herein had set up a coal based thermal power plant in the State of Chattisgarh. The project being of more than 1000 mega watts is eligible for registration under Project Import Regulations 1986. The appellant submitted an application to the Asst. Commissioner of Customs (Project Import), Visakhapatnam for registration of their contract entered with M/s. MIPP International Ltd. under the provisions of Project Import Regulations 1986 along with all necessary documents. It is submitted that on behalf of the appellant, the counsel appearing for the appellant vide letter dated 2/9/2010 had requested the Deputy Commissioner of Customs (Project Import), Visakhapatnam to register the contract and to issue a Telegraphic Release Advice (TRA) to the appropriate officer at Chennai as the first consignment was to arrive shortly at Chennai Port. However, there was no response from the Deputy Commissioner.
3.1. The first consignment consisting of Boiler and accessories of the first phase of the thermal power plant was placed for assessment before the proper officer of customs, Chennai vide bill of entry dated 16/9/2010. The proper officer of customs at Chennai, assessed the goods at merit rate of duty without granting the benefit of exemption as per the project import scheme.
3.2.The exemption was denied on the ground that the contract is yet to be registered at Visakhapatnam Custom House. Later the contract was registered on 6/12/2010 and the appellant was granted provisional mega power status under the mega power policy by the Ministry of Power, Govt. of India.
3.3. The appellant had filed the appeal before the Commissioner of Customs (Appeals), Chennai against the assessment of bill of entry dated 16/09/2010 without extending the benefit of the project import. The Commissioner (Appeals), also refused to extend the benefit for the reason that the goods were cleared before the said contract was registered.
3.4. The Ld. Counsel submitted that it is a settled law that the benefit of project imports cannot be denied on the ground that the goods were imported before registration of the contract. The issue is squaredly covered by the decision of the Tribunal in the case of M/s. Flance Proof (Gears) Ltd. Vs. CC, Bombay reported in 1998 (104) ELT 652 Tribunal.
3.5. Though the above decision was brought to the notice of the Commissioner (Appeals), the same has been distinguished in the order by stating that the issue involved in the said judgement was regarding registration of the contract under project import and in the present case the issue involved is regarding extending the benefit of the project import to goods cleared before registration of the contract. It is submitted that the Commissioner (Appeals) has failed to appreciate the case in the correct legal perspective.
3.6. The decision of the Tribunal in the case of DPS India Pvt. Ltd. Vs. Collector of Customs 1992 (62) ELT 837 Tribunal was also relied by the Ld. Counsel to submit that the benefit of project import cannot be denied merely because goods were cleared before registration of contract when the application has been filed before the import. The said judgement was upheld by the Hon’ble Supreme Court as the appeal filed by the department was dismissed as reported in 1997 (1992) ELT A130 (S.C).
3.7 During the hearing before the Tribunal, the date of issuance of the sponsoring authority’s letter and its receipt by the Customs was asked to be produced as certain machinery and equipment of the project goods have arrived at Chennai port before the completion of formalities for registration of the project under Project Import Regulations, 1986. The Ld. Counsel has submitted additional submissions on 25.08.2023 evidencing issuance of the letter of sponsoring authority vide No.1730 F-21/11/13/2/ED/Ess.Cert./RKM/2010 dated 25.08.2010 by Secretary, Government of Chhattisgarh. The sponsoring authority’s letter dated 25.08.2010 was directly despatched to Additional Commissioner of Customs, Custom House, Chennai and a copy of that letter was submitted to the proper officer at Visakhapatnam, Custom House. The Deputy Commissioner of Customs, Visakhapatnam had received this copy of the sponsoring authority’s letter dated 25.08.2010 of the sponsoring authority’s letter.
3.8 The Ld. Advocate has prayed for allowing the benefit of Project Import Regulations, 1986 for some of those machinery and equipment imported through Chennai port as the application for registration under Project Import Regulations, 1986 along with all the essential documents were submitted prior to the date of filing of the Bill of Entry in Chennai and also as the sponsoring authority has issued its recommendations for registration of the contract vice letter dated 25.08.2010 which was much before the import of the goods at Chennai port. The Ld. Counsel prayed that the appeal may be allowed.
4. The Ld. AR Shri Harindra Singh Pal supported the findings in the impugned order. It is submitted that the contract was registered only on 6.12.2010 and the goods were imported on 16/9/2010 much before the registration of the contract. The appellant therefore cannot claim the benefit of project import. As the project is yet to be registered the authorities below have correctly denied the request for reassessment. The Ld. AR made that the appeal may be dismissed.
5. Heard both sides.
6. The issue to be considered is whether the appellant is eligible for the benefit of duty exemption under project import on the goods cleared by them before the registration of the contract. The very same issue was considered by the Tribunal in the case of M/s. Flance Proof (Gears) Ltd. (Supra). In the said case, the appellant therein had imported the goods before the registration of the contract and the Tribunal held that the clearance of the goods before registration of the contract does not debar the appellant from availing the benefit of Project Import regulations, 1986. The matter was remanded to the adjudicating authority for considering the claim of the appellant. In the case of DPS (India) Pvt. Ltd. (Supra) a similar issue came up for consideration. In the said case, the contract was not registered due to delay on the side of customs authorities. The Tribunal held that the goods in question are entitled to the benefit of concessional assessment as under project import. Though the department preferred appeal against such order before the Hon’ble Apex Court, the appeal filed by the department was dismissed affirming the decision of the Tribunal. Relevant paragraph of the decision of the Tribunal reads as under:
“2. The adjudicating authority, by order dated 25th April, 1986, rejected the application for registration of the contract for the reason that the imported items were not required for setting up of a manufacturing industry. The lower appellate authority upheld the rejection on the grounds that
(a) the goods were cleared for home consumption before registration of the contract in violation of the provisions of the Project Imports (Registration of Contracts) Regulations, 1965.
(b) the goods were required for substantial expansion of a service project and not for manufacturing activity.
6. The appellants appear to have complied with the provisions of the Project Import (Registration of Contract) Regulations, 1965. As there was no response from the Authorities and the goods had arrived and were running the risk of demurrage and as the demurrage charges were rising, the appellants had no other option but to clear the goods under protest on payment of the assessed duty. Ultimately, an appellate order was issued by the Assistant Collector on 23-4-1986 i.e. about 16 months after the application for Registration as Project Import. In these circumstances, the benefit of Project Import can not be denied to the appellants on the ground that the goods were cleared for home consumption before Registration of the Contract.
9. The appellants herein had specified industrial plant at the time of importation of the machinery in question and their plant was for manufacture of computer software which falls under the heading “Electronic Components & Equipments” as recognised by the Directorate of Industry, Government of West Bengal and the Ministry of Industry, Government of India. The Directorate of Industries, West Bengal has certified that the system imported was for the substantial expansion of a specific unit. The activities to be carried on by the imported equipment are complex process somewhat akin to the activity of developing of colour films, printing, enlarging and processing of photo films as in the case of Das Colour Lab. and Saraswathi Stores.
10. Following the ratio of the above decisions, we hold that the goods in question are entitled to the benefit of concessional assessment as Project Import under Heading 84.66(1) of the Customs Tariff Act, 1975. We set aside to the impugned order and allow the appeal with consequential relief to the appellants.”
7. During the hearing the Bench raised a query as to the date of issue of letter by the sponsoring Authority and the date of receipt of the same by the Customs department. The clarification was required as it was seen from records that certain machinery and equipment of the project import goods had arrived at Chennai Port before the completion of formalities for registration of the project under the Project Import Regulations, 1986. The Ld. Counsel for appellant furnished the letter of sponsoring authority dated 25.08.2010 issued by Secretary, Government of Chattisgarh. This letter was directly dispatched to Additional Commissioner of Customs, Customs House, Chennai and a copy of the letter was submitted to the proper officer at Vishakapatnam, Custom House. It is evident from the letter dated 06.12.2010 issued by Deputy Commissioner of Customs, Vishakapatnam that the letter of sponsoring authority dated 25.08.2010 was received at their office. The said letter reads as under.
“Please refer to your application dated 23.08.2010 and subsequent correspondence on the above subject with this office.
The subject contracts dated 18.07.2007 and 20.02.2009 with your Supplier M/s. MIPP International Limited for import of equipment relating to 1×350 MW (Phase I) & 3×360 MW (Phase II) Thermal power plant is registered to the extent of Approved list of items issued by Sponsoring authority vide letter No.1880/F- 21/11/13/2/ED/Ess. Cert/RKM/2010 dated 28.09.2010, for a value of USD 215.787 Million FB (INR 1044.36 crore CIF) for Phase I and USD 721.41 Million FOB (INR 3484.50 crore) for Phase II has been registered with this Custom House under Project Import Regulations, 1986.
You are advised to quote the said reference in all your future correspondence with this Custom House on the above subject. You are also advised that further purchase order amendments, if any issued at a subsequent date may please be registered with this Custom House in advance of clearance of goods covered there under.””
8. It is thus argued by the Ld. Counsel that the benefit of Project Import Regulations, 1986 may be extended to goods imported by them through Chennai port, as all the essential documents were submitted prior to the date of filing of Bill of Entry at Chennai port. Further, the sponsoring authority had issued its recommendation for registration of the contract vide letter dated 25.08.2010 which is much before the import of goods at Chennai port.
9. The appellant having made an application for the registration of the contract prior to import of goods and sponsorship letter having been issued, we are of the view that the appellant is eligible for the exemption of duty as per the Project Import Regulations.
10. From the foregoing the impugned order is set aside. The appeal is allowed, with consequential relief if any.
(Pronounced in court on 30.08.2023)
CESTAT allows exemption of duty as per Project Import Regulations as as all the essential documents were submitted & sponsoring authority had issued its recommendation for registration of the contract both prior to the date of filing of Bill of Entry
