M/s. Green Infra Clean Wind Power Limited, 5th Floor, Tower-C, Building No. 8, DLF Cyber city, Gurgaon-122002, Haryana, a company having PAN AAJCG7352B (applicant, in short), has filed an application dated 26.09.2022 seeking advance ruling under section 28-H of the Customs Act, 1962 before the Customs Authority for Advance Rulings, New Delhi (CAAR, New Delhi in short). The application was received in the Secretariat of CAAR, New Delhi on 27.09.2022. The application was accordingly registered under serial No. 25/2022-Delhi dated 27.09.2022.
2. The applicant has stated in the application for advance ruling that, they intend to import various equipment’s and raw materials such as PV Modules, PV Cells, Inverter, Solar Cable, Power Cable, Transformers, Aluminum Frame, Solar Glass, Steel Structure, etc, for setting up of solar power plants; as per Chapter Heading 9801 00 13 of First Schedule to Customs Tariff Act, 1975,import of machinery, component or raw materials, etc. required for initial setup of a unit in power project are eligible for imports at concessional rate of duty provided the same is imported in accordance with the Project Imports Regulations, 1986 (PIR, 1986, in short) made under section 157 of Customs Act, 1962 vide Notification No.230/86-Cus. dated 03.04.1986; they intend to import solar equipment’s at concessional rate of duty under above chapter heading for setting up of solar power plant in the State of Karnataka; in light of the aforesaid submissions on facts, they seek an advance ruling with regard to the question of law namely:
Whether applicant, being a private undertaking and engaged in setting up of solar power plant, is eligible to import goods at concessional rate of duty under chapter heading 9801 00 13 of the First Schedule to the Customs Tariff Act, 1975 read with Project Import Regulations, 1986 subject to fulfillment of conditions prescribed therein?
3.1 The applicant further states that, Note No. 2 to Chapter 98 of the First Schedule to the Customs Tariff Act provides that “Heading 9801 is to be taken to apply to all goods which are imported in accordance with the regulations made under section 157 of the Customs Act, 1962 and expressions used in this heading shall have the meaning assigned to them in the said regulations”; Subheading 9801 00 13 covers “All items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment (including those required for research and development purposes, testing and quality control), as well as all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified POWER PROJECT”.
3.2 The applicant has also stated that, the P1R, 1986, provides for eligibility and procedural aspect for claiming assessment under heading No. 98.01; as per regulation 4 of the said regulations, the assessment under the said heading No. 98.01 shall be available only to those goods which are imported (whether in one or more than one consignment) against one or more specific contracts, which have been registered with the appropriate Custom House in the manner specified in regulation 5; whereas, regulation 5 of the said regulations provides for registration of contracts, the extract of the regulation 5 are as under:
“5. REGISTRATION OF CONTRACTS:-1) Every importer claiming assessment of the goods under heading No. 98.01, on or before their importation shall apply in writing to the proper officer at the port where the goods are to be imported or where the duly is to be paid for registration of the contract or contracts, as the case may be.
2) The importer shall apply, as soon as may be, after he has obtained the Import trade control license wherever required for the import of articles covered by the contract and in case of imports covered by the Open General License or imports made by Central Government, any State Government, statutory Corporation, public body or Government undertaking run as a joint stock company (hereinafter referred to as “Government Agency’) as soon as clearance from the Directorate General of Technical Development or the concerned sponsoring authority, as the case may be, has been obtained.
3) The application shall specify:-
(a) the location of the plant or project:
(b) the description of the articles to be manufactured, produced, mined or explored; (c) the installed or designed capacity of the plant or project and in the case of substantial expansion of an existing plant or project the installed capacity and the proposed addition thereto;
(d) such other particulars as may be considered necessary by the proper officer for purposes of assessment under the said heading.
(4) The application shall be accompanied by the original deed of contract together with a true copy thereof the import trade control license, wherever required and an approved list of items from the Directorate General of Technical Development or the concerned sponsoring authority,
(5) The importer shall also furnish such other documents or other particulars as may be required by the proper officer in connection with the registration of contract.
(6) The proper officer shall, on being satisfied that the application is in order register the contract by entering the particulars thereof in a book kept for the purpose, assign a number in token of the registration and communicate that number to the importer and shall also return to the importer all the original documents which are no longer required by him. “;
Further. Sub-regulation (b) of regulation 3 of PIR, 1986 provides that “(13) “Sponsoring authority” means authority specified in the Table annexed to these regulations”
3.3 The applicant has also submitted that, as per the table annexed to PIR,1986, Secretary of the State Government or Union Territory concerned dealing with the subject power of electricity is considered as ‘Sponsoring Authority’ for the purposes of power plants and transmission projects; the term ‘Power plant’ has not been defined under Customs Act; accordingly, the dictionary meaning of the same has been reproduced as, “a) a plant, including engines, dynamos, etc., and the building or buildings necessary for the generation of power, as electric or nuclear power, b) the machinery for supplying power for a particular mechanical process or operation, c) the engine, motor, or other power source along with related ignition, transmission, etc., components of a vehicle, aircraft, machine, etc.; they are of the view that a solar power plant is based on the conversion of sunlight into electricity, either directly using photovoltaics, or indirectly using concentrated solar power; they are generating electricity using PV cells and PV modules; accordingly, the solar plant projects proposed to be setup by them would squarely fall within the purview of term ‘power plant’; they should be eligible for benefit under Chapter heading 98.01 of the First Schedule to Customs Tariff Act read with PIR, 1986 subject to fulfillment of prescribed conditions and procedure therein. In this regard, the applicant has also invited reference to recent ruling by CAAR, Mumbai in the case of M/s. Aquila Solar Private Limited, wherein the authority has ruled that the benefit of Project Imports scheme should be available for a solar power plant to be set-up by the applicant in a similar set of fact pattern; thus, it is their considered view that they are even though a private sector undertaking, setting up solar power plants in Karnataka, should be eligible for benefit under Chapter heading 98.01 of the First Schedule to Customs Tariff Act read with Project Imports Regulations, 1986 subject to fulfillment of prescribed conditions and procedure therein.
4. The applicant vide their letter dated 04.11.2022 has made additional submissions stating inter-alia that, their solar power projects squarely fall within the purview of term `power projects’ as described under chapter heading 9801 00 13 of Customs Tariff Act, 1975 read with PIR, 1986; reference is drawn to Customs module – Part IV (A)(33) of the memorandum issued by Government of India explaining provisions in the Finance Bill, 2022, wherein the concessional rate of BCD provided vide Notification No. 50/2017 — Customs dated 30.06.2017 for project imports under chapter 98 was raised to 7.5% with effect from 30.09.2022 for the projects to be registered after 30.09.2022; as per the said memorandum, it has been specifically clarified that the term ‘Power Projects’ would also include Nuclear and Solar power; in view of above, the intention of the Government is clear to include the solar power projects within the purview of term ‘power project’ for the purpose of classification under Tariff heading 9801 read with Project Imports Regulations; the benefit of Project Imports Regulations has been given to renewable energy power plants as well such as wind power in the past. The applicant has placed reliance on the ruling pronounced by Advance Ruling Authority in case of Enercon (India) Limited [2007 (214) E.L.T. 561 (A.A.R.)] wherein the Authority has ruled, “10 10. In the light of the above statement and the foregoing discussion, there can possibly be no controversy that the goods required for power generation projects (not for captive consumption) proposed to be set up and run by the applicant by harnessing the wind energy, if imported in accordance with the Project Imports Regulations, 1986 will be eligible for classification under Tariff Heading No. 9801.”; this ruling further supports the claim that the intention of the Government is to cover the renewable energy power plants as well within the purview of term ‘power project for the purpose of classification under Tariff heading 9801 read with Project Imports Regulations; reference is also made to the erstwhile Notification No. 67/87‑ Customs dated 01.03.1987 which provided for concessional rate of Customs duty in case of import of goods for setting up of power projects. The explanation to the said notification defined the term, ‘power project’, and the same is read as “Explanation: ‑ For the purpose of this notification, the expression ‘power projects (including gas turbine power projects) ‘ shall mean such projects whose output or end-product is power, but shall not include captive power plants set up by projects engaged in activities other than power generation.”; in case of solar power projects as well the end product is power and accordingly, the same shall be considered as power project; reference is made to solar power policy issued by various State Governments viz. Rajasthan Solar Energy Policy, 2019 and Uttar Pradesh Solar Energy Policy, 2022wherein the term ‘solar power plant’ has been defined stating that “Solar Plant/Solar Power Plant” means a power plant or system utilizing solar energy through solar photo-voltaic or concentrated solar thermal devices for generating electricity; Solar PV Power Plant means Solar Photo Voltaic (SPV)Power Plant that uses sunlight for direct conversion into electricity through Photo Voltaic technology; the said policy documents also refer the solar power plants as power projects in the respective document; further reference is made to the various tenders issued by Government undertakings inviting bids for solar power projects; in normal parlance, the solar power plants are referred to as ‘power projects’ in the said tenders as well; it is also stated by the applicant that CI3IC has issued a Notification No. 54/2022-Customs which provides for amendments in the table of Sponsoring Authority given under Project Import Regulations 1986 as Sr. No. 2 of the table in column-2 shall read as “All Power Plants and Transmission Projects, other than solar power plants or solar power projects” in place of “All Power Plants and Transmission Projects”; and Sr. No. 3 of the table in column-2 shall read as “Power Plants and Transmission Projects, other than solar power plants or solar power projects and other than those mentioned at Sr. No. 2 above” in place of “Power Plants and Transmission Projects, other than those mentioned at Sr. No. 2 above” ;the above cited amendment through notification no. 54/2022-Customs, which excludes the solar power project/plant from Sr. No. 2 and 3 of table for Sponsoring Authority, clearly confirms that the term ‘Power Project’ used in the Chapter heading 9801 of Customs Tariff Act, 1975 includes the solar power projects/plants within its ambit; further, the notification no. 54/2022-Customs does not make any amendments in either: chapter 98 of the First Schedule to Customs Tariff Act 1975 which provide for tariff rates applicable on goods classified under chapter heading 98.01; or Sr. No. 4 of table for Sponsoring Authority in Project Imports Regulations which provides for Any other Plant and Project” in the Column no. 2; this means that the solar power projects/plants which gets excluded from Sr. No. 2 and 3 should get covered under the Sr. No. 4 of table for Sponsoring Authority in Project Imports Regulations and the relevant sponsoring authority for such projects under Sr. No. 4 is `Concerned Administrative Ministry or Department therefore, the solar power projects/plants should squarely fall within the purview of the term ‘power projects’ as provided under Chapter heading 98.01 of the First Schedule to Customs Tariff Act 1975 read with PIR, 1986 and the relevant sponsoring authority for such solar power projects shall be the ‘Concerned Administrative Ministry or Department’ which is Ministry of New and Renewable Energy (MNRE) – being the nodal Ministry of the Government of India for all matters relating to new and renewable energy.
5. Following the procedure, comments have been sought from the concerned Commissioner of Customs. Comments of the concerned Commissioner of Customs, Nhava Sheva-V have not been received in this application for advance ruling however, I note that the concerned Commissioner, Nhava Sheva-V has furnished comments in a similar applications filed by M/s. Ampsolar Urja Pvt. Ltd. And M/s. Green Infra Renewable Projects Ltd. wherein it is commented inter-alia that the PIR, 1986 prescribe for assessment and clearance of the goods falling under heading 9801 of the First Schedule of the Customs Tariff Act, 1975; the table in the Annexure lists 9 specific power plants and transmission projects; the sectors relating to these specified list of plants or projects as identified from open source shows that the power plants are either thermal or hydro-electric; the term power plant is not defined in the tariff heading 9801 of the Customs Tariff Act, 1975 or the PIR, 1986 however, it is commonly understood that a power plant is an industrial facility for generation of electric power which is connected to the grid; the Central Electricity Authority (Technical Standards for Construction of Electric Plants and Electric Lines) Regulations, 2010 defines a ‘Station’ as the term which means either the Thermal Generating Station or Hydroelectric Generation Station depending upon the context; thus, it can be seen that a power plant is envisaged in terms of either thermal or hydroelectric and not solar in the Electricity Act, 2003 and The Central Electricity Authority (Technical Standards for Construction of Electric Plants and Electric Lines) Regulations, 2010; projects are registered strictly on the basis of regulations made under the PIR, 1986 read with Circular No. 22/2011 dated 04.05.201 I; as per the list of projects mentioned in the Table annexed with the said regulations, the term Solar Power Projects is no where included, that means Solar Power Projects are excluded from the purview of PIR, 1986; accordingly there is no sponsoring authority entitled for endorsement of such solar projects as per annexed table to the PIR, 1986; it is pertinent to mention that the advance ruling in the application of M/s. Aquila Solar Power Pvt. Ltd. issued by the Customs Authority for Advance Rulings, Mumbai has been taken up by the department for filing of appeal in the Hon’ble High Court.
6. In accordance with the procedure prescribed under the Customs Authority for Advance Rulings Regulations, 2021, personal hearing was scheduled on 09.11.2022 along with other similar applications for advance ruling filed by a number of other applicants. Personal hearing in the matter was attended by representatives of the applicant who started with brief statement of facts, already given in the application. Thereafter, attention was invited to the PIR, 1986 and table annexed thereto, heading 9801 of the Customs Tariff Act, Chapter Note 2 of Chapter 98 of the Customs Tariff and comments of the concerned Principal Commissioner/Commissioner of Customs. Then, it was mentioned that the phrase, “Power Project” is not defined under the Customs Laws; accordingly, they would be considering its dictionary meaning, which relates the phrase to generation of power. Referring to the PIR, 1986, they mentioned that the Table annexed to the regulations refer only to the ‘Sponsoring Authority’ in relation to different Projects and taking into consideration the amendments carried out in PIR, 1986 vide Notification No. 54/2022-Customs dated 19.10.2022, it was interpreted that amendments have been carried out in SI. No. 2 & 3 to exclude solar power plants and solar power projects. It was further stated that in absence of any such exclusion from SI. No. 4 of the Table, same would be applicable to cover solar power plants and projects. They proceeded further and referring to the memorandum explaining provisions in the Finance Bill, 2022, it was stated that in the said memorandum, it is specifically clarified that the term, ‘Power Project’ would include Nuclear and Solar power. The AR further invited attention towards the advance ruling issued by CAAR, Mumbai. Lastly, it was mentioned that the amendments carried out vide notification dated 19.10.2022 has only changed the Table annexed to PIR to exclude solar power projects, the amending notification should have amended SI. No. 4. also; in absence of any change in the Act, rules cannot override the Act.
7.1 Having gone through the application seeking advance ruling, supporting arguments for classification and comments of the concerned Commissioner of Customs, I note that the Notification No.54/2022 –Customs dated 19thOctober, 2022 is absolutely clear on the fact that the benefit of the PIR, 1986 cannot be extended to Solar Power Projects. The Central Board of Indirect Taxes and Customs issued Project Imports (Amendment) Regulations, 2022 vide the aforesaid Notification, whereby, “In the Project Imports Regulations, 1986, against Sr. No. 2, in column2, and in Sr. No. 3, in column 2, for the words ‘All Power Plants and Transmission Projects’, the words ‘All Power Plants and Transmission Projects, other than solar power plants or solar power projects’ shall be substituted”. Further, vide notification No. 2/2022- Customs, dated 1st February 2022, `New power projects’ registered after 30th September 2022 under project imports will attract 7.5% BCD rate. [S. No. 1(155 to 163) and IV (vii) of notification No. 2/2022-Customs, dated 1st February 2022 read with Clause97(b) of the Finance Bill 2022 refers]. However, there is no mention of whether any ‘Power Project’ would include ‘Nuclear or Solar Power’ as argued in the instant case.
7.2 As regards the argument of the applicant on Sponsoring Authority, it is noted that the intent of the Notification is to prevent the States from forwarding cases as Sponsoring Authority does not hold good. As Electricity is a subject, which is placed under Item 38 in List III of the Seventh Schedule of the Constitution of India in the concurrent list, that is, on which both the Central and the State governments have jurisdiction. The Centre cannot unitarily take any decision adversely affecting the rights of the States as Sponsoring Authority as mandated under the Project Import Regulations.
7.3 Further, there are multiple entries made under the Explanatory Memorandum to the Finance Bill every year. However, only those portions find a place under the wordings of the Notification issued on the Budget Day or are part of the Finance Act are those which have got the approval of the Parliament. As per the current case, the inclusion of `Nuclear and Solar Power’ do not find any mention under the term ‘Power Projects’ under the Notification issued in context to the Project Import Tariffs or under extant Project Imports Regulations, 1986.
7.4 Moreover, without going into discussion as to whether Subheading 98010013 is correct for import of various equipments and raw materials such as PV Modules, PV Cells, Inverter, Solar Cable, Power Cable, Transformers, Aluminium Frame, Solar Glass, Steel Structure, etc. for setting up of solar power plants, I intend to discuss PIR, 1986 as Chapter Note 2 of Chapter 98 lays down that heading 9801 to be taken to apply to all goods which are imported in accordance with the regulations made under section 157 of the Customs Act, 1962 and expressions used in this heading shall have the meaning assigned to them in the said regulations. Also, as per the question framed for seeking advance ruling, ruling has been sought on the eligibility of the applicant to import goods at concessional rate of duty under Subheading 98010013 read with PIR, 1986. Accordingly, I note that as per regulation 4 and 5 of PIR, 1986, certain preconditions such as registration of contract with Custom House, clearance from the Directorate General of Technical Development or the concerned Sponsoring authority etc. are required to be fulfilled before assessment of goods under heading 9801 and clearance thereafter. 1 also note that as per Sub-regulation (b) of regulation 3 of PIR, 1986, Sponsoring authority is an authority specified in the Table annexed to PIR, 1986. Further, Sub regulation (2) of regulation 5 of PIR, 1986 lays down that in case of imports covered by Open General Licence, the importer shall have to apply as soon as clearance from the concerned sponsoring authority has been obtained. Meaning thereby that there is a clear reference in PIR, 1986 as to meaning and role of the Sponsoring authority. In light of the foregoing, it is felt to peruse plants or projects covered under various serial number of the Table annexed to PIR, 1986 as below:
|Name of Plant or Project|
|1.||All plants and projects under SSI Units,|
|2.||All Power Plants and Transmission projects under different entities,|
|3.||Power Plants & Transmission Projects other than those mentioned at SI. 2 above|
|4.||Any other Plant or Project|
The above Table makes it amply clear that SI. No. 2 list out power plants and transmission projects under various entities whereas all other power plants & Transmission projects (due to their nature or control under entities etc.) are covered under SI. No. 3 and therefore possibility of coverage of power plant or project under the Table annexed to PIR, 1986 ends at SI. No. 3 only. Moreover, the applicant has contended that solar power plant is a power plant covered under PIR and as per Notification No. 54/2022- Customs dated 19.10.2022, amendments have been carried out in SI. No. 2 & 3 to exclude solar power plants and solar power projects, in these serial numbers and in absence of any such exclusion of solar power plant from SI. No. 4 of the Table, same would be applicable to cover solar power plants and projects. This contention of the applicant is far-fetched, without any merit and it appears to have been raised to create a ground for seeking ruling in the matter, which is baseless and devoid of merit.
7.5 Thus, I am of the view that solar power plant & transmission projects have been excluded from the purview of PIR, 1986 thereby machinery, raw material, components etc. required for setting up of solar power plants are not covered under heading 9801 read with P1R, 1986.
8. I rule accordingly.