2019 (1) TMI 191 - AT - Customs

Project import - classification of the project - Water Supply Project or not - denial of benefit of Notification No. 14/2004 dated 8.1.2004 - According to Revenue, an irrigation project such as the present one, which finds a specific entry under CTH 98010012, for irrigation plant cannot be considered for registration as a water supply project under the general entry under CTH 98010020, for other projects . Held that - The Notification No. 14/2004-Cus., dated 8.1.2004 granted exemption from payment of CVD on water supply project falling under Tariff Heading 9801 of First Schedule to the Customs Tariff Act, 1975 as well as exemption from payment of basic customs duty leviable thereon. An explanation to the notification defined Water Supply Project thus Water Supply Project includes a plant for desalination, demineralisation or purification of water or for carrying out any similar processes intended to make water fit for agricultural or industrial use. In the present case, the import by the respondent was made for setting up a water supply project for agricultural and industrial use. The importer furnished the requisite certificate from the Sponsoring Authority viz. the District Collector, Mahbubnagar as required under Notification No.14/2004 dated 8.1.2004, who certified that the goods were to be used at the initial setting up of a water supply project, for Agricultural and industrial use - It is not disputed that the Sponsoring Authority s revised certificate/letter dated 15.5.2007 had clarified that the project in question is a water supply project and the said project goes through a process of making the water fit for agricultural use and thereby making them qualify as a process plant which is within the inclusive clause of the notification. Had the said letter dated 15.05.2007 been not there, still the certificate of the year 2006 issued by the Sponsoring Authority is sufficient for availing the exemption under the said notification. The Hon ble Supreme Court in the matter of M/s. Zuari Industries Ltd. Vs. Commissioner of Central Excise & Customs 2007 (3) TMI 12 - SUPREME COURT OF INDIA has laid down that once the project has been approved as a water supply project by the Sponsoring Authority, the Revenue cannot go beyond such certificate and deny the benefit of the notification. From the impugned order, it is clear that the respondent exhibited their site plans and flow charts before the ld. Commissioner and the said Commissioner was of the opinion that it clearly shows that the water being channelized through treatment and certain process before being released as fit for irrigation and therefore the revenue is not justified in denying the benefit of exemption notification to the respondent - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Classification of the project as a 'Water Supply Project'
2. Eligibility for exemption under Notification No. 14/2004-Cus dated 08.01.2004
3. Interpretation of specific vs. general entries under Customs Tariff

Issue-wise Detailed Analysis:

1. Classification of the Project as a 'Water Supply Project':
The core issue was whether the project could be classified as a 'Water Supply Project'. The respondent had imported goods for setting up a water supply project for agricultural and industrial use and furnished the necessary certificates from the Sponsoring Authority. The adjudicating authority initially denied the benefit, arguing that the project was a Lift Irrigation Project, which simply lifts and transports water, and thus did not fit the definition of a water supply project as per the notification.

However, the Tribunal found that the project involved processes making the water fit for agricultural use, thereby qualifying it as a water supply project under the inclusive definition provided in the notification. The Tribunal referenced the revised certificate from the District Collector, which clarified that the project involved making water fit for agricultural use.

2. Eligibility for Exemption under Notification No. 14/2004-Cus dated 08.01.2004:
Notification No. 14/2004-Cus exempts water supply projects from customs duty, defining such projects to include plants for desalination, demineralization, or purification of water. The respondent claimed this exemption, supported by certificates from the Sponsoring Authority.

The Tribunal upheld the eligibility for exemption, noting that the project met the criteria outlined in the notification. The Tribunal emphasized that the certificates from the Sponsoring Authority, including the revised certificate, indicated that the project involved processes to make water fit for agricultural use, thus qualifying for the exemption.

3. Interpretation of Specific vs. General Entries under Customs Tariff:
The Revenue argued that the project should be classified under the specific entry for irrigation projects (CTH 98010012) rather than the general entry for other projects (CTH 98010020). They contended that specific entries take precedence over general entries.

The Tribunal rejected this argument, distinguishing the current case from previous cases cited by the Revenue. The Tribunal noted that the project involved more than just lifting water; it included processes to make the water fit for agricultural use. Therefore, it qualified as a water supply project under the general entry and met the criteria for exemption.

Conclusion:
The Tribunal concluded that the project qualified as a water supply project and was eligible for exemption under Notification No. 14/2004-Cus. The Tribunal found no merit in the Revenue's appeal and upheld the decision of the Commissioner (Appeals), allowing the benefit of project imports to the respondent. The Tribunal emphasized that the certificates from the Sponsoring Authority were sufficient to establish eligibility for the exemption, and the Revenue could not go beyond these certificates to deny the benefit.