2018 (6) TMI 594 - AT - Customs

Project import - import of Turbine with its accessories for setting up of a Power Generation Project, as part of establishing a new sugar factory - denial of benefit on the ground of violation of import condition - case of appellant is that that though the imported goods were used to set up a power plant within the factory of the appellant, only a small percentage of the power was captively used and the bulk of the power was exported to the grid - Whether the imported turbines would be eligible for the benefit of N/N. 21/2002 for the concessional rate of duty under project import regulations? Held that - The appellants are manufacturers of sugar and to meet the additional power requirement of the new sugar factory, they have decided to set up a power generation project. There is no dispute to the fact that the power plant has been installed at the sugar factory of M/S Kothari Sugars and is meant to supply power to the sugar manufacturing factory. As per the energy projects agreement with TNEB, the appellant is allowed to sell surplus power to TNEB. It is obvious that the power generation plant where the turbine has been used is set up in the appellant s sugar factory which cannot be considered as a power generation project - the appellant will not be eligible for the benefit of the notification. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Eligibility for concessional rate of duty under Project Import Regulation 1986.
2. Interpretation of Notification No. 21/2002 regarding project imports.
3. Determination of whether imported turbines qualify for the benefit of the notification.
4. Assessment of the power generation project as a captive power plant.
5. Consideration of power usage and export to the grid in relation to eligibility for notification benefits.

Analysis:
The appeal challenged the denial of the concessional rate of duty under CTH 9801 for the import of turbines for a power generation project. The appellant argued that the power generated was mainly exported to the grid, making it eligible for the benefit of Notification No. 21/2002. However, the Revenue contended that the project was a captive power plant and lacked evidence to prove otherwise.

The Tribunal examined the Notification No. 21/2002, which excluded captive power plants set up by projects not primarily engaged in power generation from the notification's benefits. It noted that the power plant was established in the appellant's sugar factory to supply power for manufacturing, with surplus power sold to the grid. The Tribunal found that the project did not qualify as a power generation project under the notification, leading to the appellant being ineligible for the concession.

Ultimately, the Tribunal upheld the impugned order, ruling against the appellant's eligibility for the notification benefits. The decision was based on the project's classification as a captive power plant within the sugar factory, despite power exportation to the grid. The appeal was consequently rejected, affirming the denial of the concessional rate of duty under the Project Import Regulation 1986.