Case Law Details
Larsen And Toubro Limited Vs C.C.-Kandla (CESTAT Ahmedabad)
Introduction: The Customs Excise and Service Tax Appellate Tribunal (CESTAT) Ahmedabad recently delivered a crucial verdict in the case of Larsen And Toubro Limited (L&T) vs. Customs Commissioner – Kandla. The appeal contested demands for Customs duty, interest, and penalties imposed on L&T. This article provides a comprehensive analysis of the case, focusing on the taxability of processed goods leftover after fulfilling export obligations.
Background: L&T, a prominent player in providing Integrated Engineering & Construction Solutions, entered into a contract with Oil and Natural Gas Corporation Limited (ONGC) for a project involving well-head platforms and sub-sea pipelines. The dispute arose from the import of Carbon Steel Seamless Pipes under Notification No. 21/2015-Cus dated 01.04.2015 for the sub-sea pipeline construction. After completing the laying of pipes, 190 concrete-coated pipes remained unused, which were subsequently sold to M/s. Bombay Marine Enterprises. The Customs authorities issued a show-cause notice, alleging a violation of ‘Condition X’ of Notification No. 21/2015-Cus.
Legal Arguments: L&T argued that ‘Condition X’ applied to the imported seamless pipes, not the concrete-coated pipes manufactured from them. They emphasized the distinction between the goods imported and those produced domestically. Additionally, they relied on para 4.16 of the Foreign Trade Policy 2015-20, allowing the transfer of goods manufactured from duty-free inputs after fulfilling export obligations. L&T cited the precedent of PCL Oil & Solvent Ltd, where relief was granted in similar circumstances.
CESTAT’s Analysis and Decision: The CESTAT carefully examined the provisions of ‘Condition X’ in Notification No. 21/2015-Cus, which restricts the transfer of imported materials. The tribunal clarified that this condition applies to the goods imported under the notification, i.e., the seamless pipes, and not to the concrete-coated pipes manufactured from them. The tribunal emphasized the importance of distinguishing between the two categories of goods.
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