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TMI Blog2007 (5) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... exures C and D to the application). 2. The applicant submits that it intends to set up independent power generation projects of different capacities across India by harnessing wind energy. The applicant also proposes to have a business tie up with an existing company/project by entering into an 'agreement to sell' in order to set up wind- energy based independent power project. The business activities proposed to be undertaken by the applicant are set out in Annexure-II to the application as follows: "BUSINESS ACTIVITY TYPE-I — Enercon India Ltd. intends and desires to set up power generation projects across India in different states by harnessing wind energy by setting up large number of independent power generation projects along with power stations, whereby electricity so generated will be connected to local grid supplying power to consumers for which a separate division called IPP division is being carved out in their organizational set up. The IPP division shall set up an independent power generation project of different capacities by importing from places outside India goods i.e. machinery instruments, apparatus appliances transmission equipment, auxiliary equipment com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 21/2002-Cus., dated 1-3-2002? (b) Whether the said goods referred to in question No. 1 will be eligible for exemption from the whole of the additional duty of customs under Section 3(1) of the Customs Tariff Act, 1975 by virtue of serial No. 84, list 5, item 13 of Central Excise Notification No. 6/2006-C.E., dated 1-3-2006?' (c)Whether the said goods referred to in Question No. 1 will be eligible for exemption from the whole of the additional duty of customs under Section 3(5) of the Customs Tariff Act, 1975 by virtue of serial No. 11 of Custom Exemption Notification No. 20/2006-Cus., dated 1-3-2006?" 5. The Commissioner of Customs (Import), Nhava Sheva, Raigad, Maharashtra in his comments stated that Chapter Heading 9801 of the First Schedule to the Customs Tariff Act, applies only to specified projects sponsored by specified sponsoring authorities with a detailed itemized list of goods to be imported duly attested by the sponsoring authority and imported under specific contracts registered prior to the import of the goods. In this application, there is no such sponsored project and there is no specific list of goods duly approved by the sponsoring authority as bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit", of a specified: (1) Industrial plant, (2) Irrigation project, (3) Power project", (4) Mining project, (5) Project for the exploration for the oil or other minerals, and (6) Such other project as the Central Government may having regard to the economic development of the country notify in the Official Gazette in this behalf; and spare parts, other raw materials (including semi finished material) or Consumable Stores not exceeding 10 % of the value of the goods specified above provided that such spare parts, raw materials or consumables stores are essential for the maintenance of the plant or project mentioned in (1) to (6) above Machinery: 9801 00 11 ---For industrial plant project…… Kg. 12.5% - 9801 00 12 ---For irrigation plant….. Kg. 12.5% - 9801 00 13 --- For power project……. Kg. 12.5% - 9801 00 14 ---For mining project……. Kg 12.5% - 9801 00 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... barge mounted power plants (vi) power transmission sub-transmission or distribution projects; 5% 5% 5% 5% 7.5% 16% 16% 16% - 16% - - - - - ---- ---- ----------------- ----- ------ ------- 7.4 The Heading No. 9801 also occurs at some other serial numbers, but we are not concerned with them. Suffice it to refer to Sl. No. 441, which reads as follows : S. No. Chapter or Heading or sub-Heading Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6) 441. 9801 All goods 7.5% - - Having regard to the specific entry relating to goods required for certain projects, this general entry will not be of relevance in the instant case. 7.5 It is seen from the Notification No. 21/2002-Cus. that the goods required for the power generation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods enumerated in the said Chapter. Obtaining from the sponsoring authority an approved list of items required for setting up the project, the registration of contracts with the appropriate officer of the Customs House and filing an application with the requisite particulars and documents are indispensable requirements for bringing the import of goods needed for specified projects within the fold of Heading No. 9801. if any authority is needed, we may refer to the decision of Supreme Court in Mihir Textiles Ltd v. Collector of Customs, Bombay, 1997 (92) E.L.T. 9 (S.C.). In that case, concessional tariff was claimed under Tariff Heading No. 84.66. The proviso thereto is more or less the same as Note 2 of Chapter 9801. The Supreme Court analyzed the proviso and held as follows: "The proviso prescribes, principally, three conditions to be satisfied for entitlement of the concessional rate shown in the aforesaid entry. They are - (1) Goods should have been imported against a specified contract registered with the appropriate Customs House; (2) Such registration should have been made in the manner prescribed by the regulations; (3) Registration of the contract should have been obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or captive consumption) proposed to be set up and run by the applicant by harnessing the wind energy, if imported in accordance with the Project Import Regulations, 1986 will be eligible for classification under Tariff Heading No. 9801. Accordingly the first question is answered . 11. We would however like to clarify two things, firstly we have not examined with reference to each item of goods, specified in Annexure - "J" whether these goods are in fact required for setting up the wind energy based power plant. That is a matter which primarily has to be addressed by the sponsoring authority while preparing and approving the list. The second point which we would like to clarify to obviate possible controversy, is that the expression 'deed of contract' should not be narrowly construed as applicable only to a formal document styled as agreement or contract incorporating all the terms and conditions governing totality of supplies made from time to time. Contractual documents normally exchanged between buyer and seller in commerce such as order and acceptance containing sufficient particulars of the transaction can also be treated as 'deed of contract'. QUESTIONS 2 (a) (c) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is liable to be paid on the components and parts of wind operated electricity generator (which are imported under Chapter 98 along with the other goods required for setting up wind Power Projects) in view of the Central Excise Notification No. 6/2006, it is the contention of the Sr. Departmental Representative that in respect of all the goods involved in project import, the applicant can only claim the benefit of reduced rate of additional duty (16%) under the Notification No. 21 /2002-Cus. Having claimed the benefit of reduced basic customs duty in relation to such project imports, it is not open to the applicant to fall back on some other notification in so far as the additional duty on some of the goods is concerned. 13.1 In order to appreciate the controversy, let us take stock of the relevant provisions. We have already referred to Notification No. 21 /2002-Cus. at Paragraph 7.2 supra and again while answering the question No. 2(a). The basic or standard rate of duty specified by the said notification in respect of goods required for power generation projects etc. falling within Chapter 9801 is 5% and the additional duty specified is 16%. The basic duty and additional du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India. The explanation to this sub section expands the meaning of the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India"………." In Paragraph 14, the Court enumerated various types of Customs duty leviable under the two Acts and observed thus : "…….Customs Act, 1962 and the Customs Tariff Act, 1975 are two separate independent statutes. Merely because the incidence of tax under Section 3 of the Customs Tariff Act, 1975 arises on the import of the articles into India it does not necessarily mean that the Customs Tariff Act cannot provide for the charging of a duty which is independent of the Customs duty leviable under the Customs Act." In Paragraph 17, it was observed: "…….On a correct interpretation of the relevant provisions of the two Acts there can be no manner of doubt that additional duty which is levied under Section 3(1) of the Tariff Act is independent of the Customs duty which is levied under Section 12 of the Customs Act The character and object of additional duty under Section 3(1) has been explained as follows : "…….Even though the impost under Section 3 is not called a countervailing duty there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest so to do, hereby exempts the excisable goods of the description specified in column (3) of the Table given below read with the relevant List appended hereto, as the case may be and falling within the Chapter heading or sub-heading or tariff item of the First Schedule to the Central Excise Tariff Act 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions specified in the Annexure to this notification, and condition number of which is referred to in the corresponding entry in column (5) of the Table aforesaid: Table S. No. Chapter or Heading or sub-Heading or Tariff Item of the First Schedule. Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) --- ------ ------ ---- - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned on the importer, by taking resort to the notification issued under the Customs Act. In other words, 16% additional duty prescribed in column 5 of Notification No. 21/2002-Cus. cannot be given effect to in a situation where the importer has no liability to pay duty on the terms of the charging provision itself. To elaborate, the benefit which accrues to the importer by virtue of the application of the criteria laid down in Section 3(1) cannot be taken away by taking recourse to the Notification issued under Section 25 of Customs Act. The maximum rate specified in the notification which is in the nature of subordinate legislation cannot be projected into Section 3(1) if the article is otherwise not chargeable to duty under the charging section itself. 16. What follows therefore is this: If all or some of the articles imported under Chapter 9801 in accordance with Project Import Regulations fall within the description of wind operated electricity generator, its components and parts mentioned in List 5 (Sl. No. 84) appended to Central Excise Notification No. 6/2006, the importer will be out of the net of additional duty imposed by Section 3(1) of C.T. Act. Can it be said in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion : What then will be the quantum or rate of additional customs duty under Section 3(1) of the C.T. Act? Answer : (a) In relation to the components and parts of wind operated electricity generator no additional duty is leviable under Section 3(1) because no excise duty is leviable on such articles by reason of Notification No. 6/2006-C.E. (b) In regard to the other items imported under Tariff Heading 9801, the additional duty applicable would be not more than 16% (vide Notification No. 21/2002-Cus.). 17.4 In the case of (a), the benefit of nil duty accrues to the importer by the application of the criterion or measure provided by the section itself i.e. Section 3(1) read with the Central Excise notification. In the case of (b), the benefit of lesser rate of 16% accrues by virtue of Notification No. 21/2002-Cus. issued under Section 25(1) of the Customs Act. But for this notification, some of the goods required for power generation projects if manufactured in India would have attracted Central Excise duty at a rate higher than 16%. 18. There is no legal bar to the importer getting the benefit of duty relief/concession under two different provisions. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first proviso to Section 8 of the Indian Income-tax Act, 1922, the whole of interest on such part of borrowed capital as was expended on the purchase of both types of securities should be deducted. It was also held that under the second proviso the whole of the interest receivable on the tax free securities should be excluded in addition to the deduction in respect of the interest on borrowed capital. The Court observed, after referring to Lord Wright's judgment, in Hughes v. Bank of New Zealand (6 ITR Page 541), there is no reason why the tax payer should not get a double advantage if that can reasonably be spelled out of an enactment". In Hughes's case, the contention of the Revenue that the assessee cannot get double advantage by getting the benefit of exemption under a particular provision and at the same getting the advantage of deducting the expenses attributable to the earning of the exempted income, was rejected, on the plain language of the relevant section. 21. The issue can also be examined from the point of view of the objective of the section and the notification. The object of Section 3(1) of C.T. Act as clarified by the Supreme Court is to counter-balance the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by claiming the imported machinery to be covered by Tariff Item 84.66, it was not open to the appellant later on to canvass much less claim that the machinery in question is covered by Tariff Item 84.31, for receiving the benefit of total exemption under Notification 62/83 and that it is not liable to pay auxiliary duty at the reduced rate of 20% on goods falling under Tariff Item 84.66 under Notification No. 61/83." "In the established facts and circumstances of the case, the appellant was not entitled to the benefit of total exemption from payment of auxiliary duty under Notification 62/83 as rightly held by the Division Bench." No such situation as pointed out by the Supreme Court arises here. 23. Another decision relied upon by the learned Departmental Representative is that of the CESTAT, South Zonal Bench reported in 2006 (203) E.L.T. 287. 23.1 The question there was whether the 'steam turbine' can be brought within the ambit of item 16 of List 9 of a similar C.E. notification. It was held that steam turbine by itself does not produce energy and therefore do not fall within the description 'waste conversion devices producing energy'. Item 13 with which we are con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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