Commissioner of Customs (Preventive) Vs ACME Aklera Power Technology Pvt. Ltd. (CESTAT Delhi)
The appeal was filed by the Department before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi, challenging the order dated 26.03.2024 passed by the Commissioner (Appeals), Customs, Central Excise & CGST, Jaipur, which set aside the order dated 28.12.2023 passed by the Assistant Commissioner.
The Assistant Commissioner had directed payment of interest of Rs.2,88,17,955/- on duty paid upon ex-bonding of goods covered under ten Bills of Entry, invoking Section 61(2) of the Customs Act, 1962 and paragraph 12 of the CBIC Circular dated 01.10.2019. The amount deposited by ACME Aklera Power Technology Pvt. Ltd. on 12.12.2023 was directed to be adjusted.
ACME Aklera Power Technology Pvt. Ltd. is engaged in development and establishment of solar power projects. It entered into a Power Purchase Agreement dated 10.06.2019 with Solar Energy Corporation of India Ltd. The Central Government introduced the Manufacturing and Other Operations in Warehouse Regulations, 2019, permitting deferral of customs duty payment on imported capital goods, machinery and inputs used for manufacturing or other operations in a private bonded warehouse.
CBIC issued Circular dated 01.10.2019 laying down procedures and documentation requirements for units operating under the 2019 Regulations, including permissions, execution of bonds, receipt, storage, removal of goods, maintenance of accounts and audit procedures.
For establishing its solar power project, ACME imported solar modules into warehouses. These included different varieties of modules with varying watt capacities. ACME imported a total of 8,37,288 solar modules. According to ACME, it installed more than seven lakh modules by November 2023.
Subsequently, ACME found that solar modules of different watt peaks could not be uniformly adjusted in the module mounting structures and that available land was insufficient to accommodate the planned design. Due to changes in the plant layout, 48,742 solar modules, representing approximately 5.82% of total imported modules, could not be installed. ACME decided to remove these modules from the warehouse after payment of applicable customs duties.
ACME informed customs authorities through a letter dated 28.11.2023 regarding its intention to remove the modules. The Assistant Commissioner thereafter passed an order dated 28.12.2023 holding that interest was payable under Section 61(2) of the Customs Act and paragraph 12 of the CBIC Circular dated 01.10.2019.
ACME challenged this order before the Commissioner (Appeals), contending that interest under Section 61(2) was wrongly imposed because the imported solar modules were always intended for use in the warehouse project and were removed only due to subsequent changes in plant design and layout.
The Commissioner (Appeals) allowed ACME’s appeal and held that the goods were covered under Section 61(1)(a) of the Customs Act. The Commissioner observed that capital goods intended for use in a warehouse where manufacturing or other operations are permitted under Section 65 could remain warehoused until clearance, and interest was not payable on clearance after payment of applicable duties.
The Commissioner further held that paragraph 12 of the CBIC Circular dated 01.10.2019 was not applicable because the solar modules were capital goods intended for use in the project and were removed due to changes in design and layout. ACME had imported the goods under Section 65 with the intention of using them in its project, but 48,742 modules could not be used due to changed circumstances.
The Department challenged the Commissioner (Appeals)’s order before CESTAT. The Department argued that Section 61(2) applied to the goods and that interest was payable because the modules remained in the warehouse beyond ninety days. It also contended that if the modules were not intended for use, ACME should have cleared them immediately and that the delay indicated an attempt to avoid interest.
ACME argued that the solar modules were intended for use in the warehouse and that the expression “intended for use” was different from “actual use”. It relied on judicial precedents to submit that the intention at the time of import and storage was relevant.
CESTAT examined Section 61(1)(a) of the Customs Act, which permits capital goods intended for use in a warehouse where operations are permitted under Section 65 to remain warehoused until clearance. The Tribunal observed that the goods were capital goods and that the warehouses were covered under Section 65. The only issue was whether the solar modules were intended for use in the warehouses.
The Tribunal referred to the meaning of “intend” and “intended” and observed that the term “intended for use” is distinct from “actual use”. It relied on judicial precedents where courts held that “for use” means “intended for use” and does not require actual utilisation.
CESTAT noted that ACME had imported the solar modules for use in its solar power project and that only 48,742 modules could not be installed due to subsequent changes in project design and layout. The Tribunal found that the decision to remove the modules could not have been taken immediately upon import, as it was only after installation activities and project layout considerations that ACME determined that the modules could not be accommodated.
The Tribunal held that the modules were intended to be used in the project and upheld the findings of the Commissioner (Appeals). Accordingly, the Department’s appeal was dismissed.
Cases Discussed
- State of Haryana Dalmia Dadri Cement Ltd. (Supreme Court), 2004 (178) E.L.T. 13 (S.C.)
- BPL Display Devices Ltd. Commissioner of Central Excise, Ghaziabad (Supreme Court), (2005) 10 Supreme Court Cases 275
- Steel Authority of India Ltd. Collector of Central Excise (Supreme Court), (1996) 5 Supreme Court Cases 484
FULL TEXT OF THE CESTAT DELHI ORDER
The department has filed this appeal to assail the order dated 26.03.2024 passed by the Commissioner (Appeals), Customs, Central Excise & CGST, Jaipur1, by which the order dated 28.12.2023 passed by the Assistant Commissioner has been set aside. The Assistant Commissioner, by the said order dated 28.12.2023, directed for payment of interest on the duty paid on ex-bonding of goods through the ten Bills of Entry under section 61(2) of the Customs Act, 19622 read with paragraph 12 of the Central Board of Indirect Taxes and Customs 3 Circular dated 01.10.2019. The interest amount of Rs. 2,88,17,955/- in respect of the ten Bills of Entry deposited on 12.12.2023 was directed to be adjusted.
2. ACME Aklera Power Technology Private Limited 4, which is a respondent is this appeal, is engaged in the development and setting up of solar power projects across the country. It entered into a Power Purchase Agreement dated 10.06.2019 with Solar Energy Corporation of India Ltd5. The Central Government introduced Manufacturing and Other Operations in Warehouse Regulations, 20196 allowing deferral from payment of customs duty on import of capital goods, machinery and inputs for carrying out operations (manufacturing process or other operations) in a private bonded warehouse.
3. To further clarify the 2019 Regulations, a Circular dated 01.10.2019 was issued by CBIC. It lays down the procedures and documentations required for units in a comprehensive manner, including the format of the application seeking permission, provision of execution of the bond by the licensee, receipt, storage and removal of goods, maintenance of accounts and conduct of audit.
4. In order to set up its solar power project within the Warehouses which were spread across four plots, ACME imported 5,34,956 solar modules corresponding to 248.84 MW into the warehouses. The imported solar modules were of various types-440 Wp, 445 Wp, 450 Wp, 455 Wp, 540 Wp, 545 Wp. ACME further imported 1,57,502 solar modules corresponding to a capacity of 73.25 MW. The said modules were also of varying watt peaks. ACME also imported 1,12,758 number of solar modules corresponding to a capacity of 50.57MW.
5. According to ACME, it started installation of modules and installed more than 7 lakhs modules by November 2023 across different plots of the project. However, it was later discovered by ACME that the modules which were of various watt peaks could not uniformly be adjusted in the module mounting structures and the land was not sufficient to accommodate such design of structures and modules. This led to a change in the plant layout. Accordingly, such modules which could not be set up, were ex-bonded from the warehouses and used outside the warehouses of the same project. For this reason, 48,742 modules (5.82%) could not be installed due to the change in the plant layout.
6. bACME, by a letter dated 28.11.2023, intimated the customs authorities regarding its intention to remove these 48,742 solar modules from its warehouse on payment of applicable customs duties.
7. An order dated 28.12.2023 was issued by the Assistant Commissioner holding that interest amounting to Rs. 2,88,17,955/- is liable to be paid on removal of these from the warehouses under section 61(2) of the Customs Act and paragraph 12 of the CBIC Circular dated 01.10.2019.
8. ACME preferred an appeal before the Commissioner (Appeals) to challenge the order 28.12.2023, primarily on the ground that interest under section 61(2) of the Customs Act was wrongly levied in as much ACME always intended to use the imported goods for manufacturing electricity in its warehouses and the same were ex-bonded only due to change in plant layout and design.
9. The Commissioner (Appeals) passed the order dated 01.04.2024 setting aside passed by the Assistant Commissioner holding that:
i. ACME is covered under section 61(1)(a) of the Customs Act, which envisages that the capital goods that have been imported in the warehouse may remain stored in the said warehouse till their clearance in DTA on payment of applicable duties and no interest shall be payable at the time of the said clearance;
ii. Upon detailed examination of figures of receipt, handling, storing and removal of the warehoused goods in respect of solar modules imported during September, 2022 to October, 2023, paragraph 12 of Circular dated 01.10.2019 is not applicable as the concerned solar modules could not be installed due to subsequent changes in design, layout of the project and, therefore, the same were removed from the warehouse by filing the ex-bond Bill of Entries as per section 61(1)(a) of the Customs Act on payment of applicable duties;
iii. ACME had imported capital goods under section 65 of the Customs Act with intention use it is its project. However, 48742 (approx. 5.82% of total imported quantity) could not be used for intended purpose;
iv. Warehoused imported goods which were intended for use in the project of ACME can also be cleared for home consumption in terms of section 61(1)(a) of the Customs Act; and
v. The provisions of section 61(1)(a) of the Customs Act and paragraph 12 of the Circular dated 01.10.2019 have been erroneously applied.
10. Pursuant to the aforesaid order of the Commissioner (Appeals) ACME filed a refund application.
11. The department has filed this appeal to assail the order dated 01.04.2024 passed by the Commissioner (Appeals).
12. Shri Nagendra Yadav, learned authorized representative appearing for the department made the following submissions:
i. The Commissioner (Appeals) erred in holding that sub-section (2) of section 61 of the Customs Act is not applicable for impugned capital goods, as these goods are specified in clause (a) of sub-section (1) of the section 61 of the Customs Act, but the said subsection is applicable for warehoused goods specified in clause (c) of sub-section (1) of the section 61 of the Customs Act;
ii. As per sub-section (2) of section 61 of the Customs Act, interest is applicable on ex-bonding of warehoused capital goods other than those goods intended for use in hundred percent export-oriented undertaking or electronic hardware technology park unit or software technology park unit or any warehouse wherein manufacture or other operations have been permitted under section 65 of the Customs Act;
iii. The Commissioner (Appeals) erred in holding that the warehoused imported capital goods, which were imported under section 65 of the Customs Act and intended for use in the project under the 2019 Regulations may be cleared for home consumption in terms of section 61(1)(a) of the Customs Act;
iv. If the design and layout of the project was changed at or about the time when the impugned goods were imported, then the importer should have filed Ex-bond Bills of Entry immediately to clear the impugned goods from bonded warehouse. However, the importer kept the goods in the bonded warehouse for a long period of 9 to 10 months without installing them;
v. The importer has not given any satisfactory reason for non-installations of the impugned goods. It is clear that the importer has filed Bills of Entry only to evade interest for a period of 6-7 months; and
vi. Interest is leviable on the goods for the period for which the said goods remain in warehouse beyond a period of ninety days.
13. Ms. Mannat Waraich assisted by Ms. Ananya Goswami, learned counsel for ACME made the following submissions:
(i) The solar modules warehoused by ACME were „intended to be used‟ in the warehouses and hence classifiable under section 61(1)(a) of the Customs Act;
ii. The term „intended for use‟ is in contradistinction with the term „actual use‟. In this regard, reliance has been placed on the decision of the Supreme Court in State of Haryana Dalmia Dadri Cement Ltd. 7 , where the Supreme Court distinguished the terms „intended for use‟ and „goods used‟ or „goods actually used‟;
iii. Where the term used in the statute is „intended for use‟ and not „actual use‟, the same must be interpreted in a manner to eschew its meaning;
iv. In the present case, on the date when such modules were deposited as well during the entire period of such deposit, the modules were „intended for use‟ in the warehouse;
v. It is clear that all solar modules which were deposited in the warehouses were wholly „intended for use‟ in the warehouses and but for the change in plant design and layout, the remaining 5% module have also been used in the warehouse itself;
vi. The burden of proof lies on the department to prove that ACME did not intend to install the goods in the warehouses; and
vii. Paragraph 12 of Circular dated 01.10.2019 is applicable in cases where goods which are not intended for use in the warehouse are stored therein.
14. The submissions advanced by the learned authorized representative appearing for the department, which is the appellant in this appeal, and the submissions advanced by the learned counsel for the respondent have been considered.
15. The issue involved in this appeal relates to the section 61(1)(a) of the Customs Act. The relevant portion is, accordingly, reproduced below:
“61. Period for which goods may remain warehoused:-
(1) Any warehoused goods may remain in the
warehouse in which they are deposited or in any warehouse to which they may be removed,-
(a) in the case of capital goods intended for use in any hundred percent, export oriented undertaking or electronic hardware technology park unit or software technology park unit or any warehouse wherein manufacture or other operations have been permitted under section 65, till their clearance from the warehouse.”
(emphasis supplied)
16. Section 61(1)(a) of the Customs Act provides that warehoused goods can remain in the warehouse where they are deposited, till their clearance from such warehouse, subject to satisfaction of the following conditions:
i. Such goods are in the nature of capital goods;
ii. Such capital goods are „intended for use‟ in the ware house where manufacturing operations are permitted under section 65.
17. It is not in dispute that the goods in the present appeal are in the nature of capital goods and that the warehouses are such where manufacturing operation are permitted under section 65 of the Customs Act. The only aspect which requires consideration is whether the solar modules, including the 48,742 solar modules, were „intended for use’ in the warehouses. The dispute is only with regard to 48,472 solar modules which were cleared from the warehouses without being installed in the solar power projects.
18. The terms „intend’/’intended’ have been defined in the following manner:
i. Black Law Dictionary – To have in mind a fixed purpose to reach a desired objective; to contemplate that the usual consequences of one’s act will probably or necessarily follow from the act;
ii. Oxford Dictionary– to have a plan, result or purpose in your mind when you do something; tying to achieve or reach;
iii. Advanced Law Lexicon– to have in one’s mind as a purpose or goal.
19. The term „intended for use’ is in contradistinction to the term „actual use’. This aspect has been highlighted by the Supreme Court in Dalmia Dadri Cement. The Supreme Court observed that the clause mentioned „for use’ would mean „intended for use’, and this is different from „goods actually used’ or „goods used’. The relevant portion of the decision is as follows:
“10. We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression “for use” must mean “intended for use”. If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, “goods actually” used or “goods used”.”
(emphasis supplied)
20. This decision of the Supreme Court in Dalmia Dadri Cement was followed by the Supreme Court in BPL Display Devices Ltd. Commissioner of Central Excise, Ghaziabad8.
21. In Steel Authority of India Ltd. Collector of Central Excise9, the Supreme Court again examined the words „intended for use‟ and the relevant observations are as follows:
“6. It is important to note that the exemption notification required proof that the raw naphtha was „intended for use‟ in the manufacture of fertiliser and not that the raw naphtha was used in the manufacture of fertiliser. xxxxxxxxxxx.
7. There can be no doubt that the raw naphtha that was fed by SAIL into its plant was for the purpose and with the intention of manufacturing fertilizer and that it was only because of supervening circumstances, namely, the low, uncertain and fluctuating availability of power, that the reformed gas produced during the interim stage of manufacture had to be vented out. The benefit of the exemption notification is, therefore, available to SAIL in regard to the raw naphtha that it utilized in its plant for the manufacture of fertilizer but which, for reasons over which it had no control, did not, in fact, result in the manufacture of fertilizer but had, at the interim stage of reformed gas, to be vented out.”
(emphasis supplied)
22. In the present case, as noticed above, it is not in dispute that the capital goods, namely solar modules, that remained in the warehouse were permitted for manufacture for other operations under section 65 till clearance from the warehouse. A categorical finding has been recorded by the Commissioner (Appeals) that out of 8,37,288 Solar Modules only 48,742 Solar Modules could not be installed due to subsequent change in design, layout of the project and these were removed from the site by filing ex-bond Bills of Entry on payment of applicable duties of customs. These 48,742 solar modules contributed to only 5.82 percent of total imported Solar Modules. The Commissioner (Appeals) formed an opinion that the solar modules that were imported were „intended for use‟ in the project and the relevant portion of the findings recorded by the Commissioner (Appeals) is as follows:
“7.2 The appellant imported 50121 solar modules vide 10 BEs mentioned in para 2.1 above and warehoused the same in the MOOWR licensed warehouse in February, 2023 & March, 2023. The appellant installed only 1379 solar modules out of 7728 imported vide Warehouse Bill of Entry No. 4770998 dated 23/02/2023. Further, I find that remaining 48742 Nos. Solar PV Modules imported by the appellant vide 10 BEs mentioned in para 2.1 above were not used or installed by them and they filed Ex-bond B/E on 01/12/2023 & 02/12/2023 for domestic clearance of same on payment of applicable duties.
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9. I would like to examine provisions of section 61(2) of the Customs Act, 1962 and provisions of para 12 of the CBIC Circular No. 34/2019-Customs dated 01.10.2019 as under-
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I find that the impugned case is covered under clause 1(a) of section 61 of the Customs Act, 1962 in which the capital goods may remain in the warehouse till their clearance from the warehouse, hence in this situation at the time of clearance of Capital Goods in DTA (Domestic Tariff Area), interest is not payable & only applicable duties are required to be paid. As regards, para 12 of the CBIC Circular No.34/2019-Customs dated 01/10/2019, I find that the said para discussed the applicability of import duties & interest on warehoused goods specified in clause (c) of sub-section 61(1) ibid i.e. other goods, which are not specified in clause (a) and (b) of sub-section 61(1) ibid, which remain in a warehouse beyond a period of ninety days from the date on which the proper officer has made an order under sub-section (1) of section 60 till the date of payment of duty on the warehoused goods.
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10.1. xxxxxxxxxxx. I have also examined the figures of receipt, handling, storing and removal of the warehoused goods in respect of Solar Modules imported during September, 2022 to October, 2023 submitted by the appellant to the department in terms of Circular No. 25/2016-Cus dated 08/06/2016 and find that only 48742 Nos. (501211379) Solar Modules out of 8,37,288 Nos Solar Modules imported by them during above period could not be installed due to subsequent changes in design, layout of project etc and these were removed from site by filing the ex-bond Bill of Entry as per provisions of section 61(1)(a) of the Customs Act, 1962 on payment of applicable customs duties.
10.2 Further, I find that the appellant had imported capital goods under section 65 of the Customs Act, 1962 with intention to use in project but 48742 No. (approx. 5.82% of total imported quantity) could not be used for intended purpose due to reasons discussed above. I also observed that the warehoused imported capital goods, which were imported under section 65 of the Customs Act, 1962 and intended for use in the project under the Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 may be cleared for home consumption in terms of section 61(1)(a) of the Customs Act, 1962.”
(emphasis supplied)
23. It is not possible to accept the contention of the learned authorized representative appearing for the department that if 48,742 solar modules were not „intended for use‟, they should have been immediately ex-bonded and should not have remained in the warehouse for six to seven months. It is because of the fact that ACME could not adjust these 48,742 solar modules in the module mounting structure and the land was also not sufficient to accommodate the design of structure and modules, that it was left with no option but to ex-bond these solar modules from the warehouses. Such a decision could not have been taken by ACME immediately upon import of the solar modules. It is only when it realized that these 48,742 solar modules could not be utilized because of the layout that a decision was taken to ex-bond them from the warehouses and use them outside the warehouses. ACME did have the intention to use these solar modules also in their project for the reasons stated above. Such being the position, there is no error in the finding recorded by the Commissioner (Appeals) that these 48,742 solar modules were intended to be used in the project.
24. The present appeal would, therefore, have to be dismissed and is dismissed.
Notes:
1 the Commissioner (Appeals)
2 the Customs Act
3 CBIC
4 ACME
5 SECT
6 the 2019 Regulations
7 2004 (178) E.L.T. 13 (S.C.)
8 (2005) 10 Supreme Court Cases 275
9 (1996) 5 Supreme Court Cases 484
