2014 (10) TMI 672 - AT - Customs

Denial of benefit of Notification No. 14/2004, dated 8-1-2004 - Substantial expansion - Import of reverse osmosis machine - Held that - On going through the said explanation, we find that substantial expansion means the expansion which will increase existing installed capacity by not less than 25%. As such, it is clear that the imports would be covered under the project import if the same are required for increasing already existing installed capacity of the plant by 25%. First of all normally, interpretation of the same would lead us to conclude that the expansion means which will increase installed capacity in respect of the appellant manufacturing unit. The appellant in the present case is manufacturing oil and admittedly the RO machine is not increasing the capacity for production of oil. As such, we do not agree with the ld. Advocate s contention. Secondly the appellants have not produced any evidence on record that installation of RO machine in their unit would result in expansion of oil manufacturing machine to the extent of 25%. As such, we are of the view that RO Machine, cannot be held to be a project in terms of the said regulation. - Decided against assessee.

Summary

Issues: Classification of imported reverse osmosis machine under Central Excise Tariff Act, applicability of Notification No. 14/2004 for duty exemption, interpretation of 'substantial expansion' under Project Import Regulations, 1986.

In this case, the appellant, engaged in manufacturing oils, imported a reverse osmosis machine from China. The appellant claimed classification under Heading 98.01 and exemption from duty under Notification No. 14/2004. However, both lower authorities denied the classification benefit, stating that the machine did not qualify as a water supply project under Project Import Regulations, 1986. The authorities held that the machine did not meet the definition of 'project' and was not considered an industrial plant. The original adjudicating authority confirmed a duty demand of Rs. 2,36,389 without imposing a penalty. The Commissioner (Appeals) upheld this decision, leading to the present appeal.

The Commissioner (Appeals) analyzed the appellant's contentions in detail. The appellant argued that the reverse osmosis machine was imported to enhance the utility plant for steam generation in their factory, falling under the explanation (c) of Regulation 3 for substantial expansion. However, the Tribunal found that 'substantial expansion' meant increasing the existing installed capacity by at least 25%. The machine did not increase the oil manufacturing capacity, and the appellant failed to provide evidence of a 25% capacity expansion due to the machine. Consequently, the Tribunal concluded that the machine did not qualify as a project under the regulation.

The appellant referred to Notification No. 14/2004-Cus., seeking exemption under Heading 98.01 for water supply projects. However, the Tribunal ruled that the notification did not apply to the reverse osmosis machine. The appellant's reliance on a previous Tribunal decision regarding the benefit under Heading 98.01 for industrial plants was dismissed. Since the machine did not meet the substantial expansion criteria, the benefit of the notification was deemed unavailable. Therefore, the appeal was rejected, affirming the lower authorities' decision.