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TMI Blog2008 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the goods required for in-plant coal handling system however fall within the scope of Entry 400 X X X X Extracts X X X X X X X X Extracts X X X X ..... r more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura; or (d) an interstate hydel power plant of a capacity of 500MW or more, located in States other than those specified in clause (c) above We are concerned here with clause (b) of the above Table. 2.2 The immediately preceding Entry is also relevant. The material portion thereof is extracted below: 2.3 Notification No. 21/2002-Cus was issued by the Central Government in exercise of the powers conferred by Section 25(1) of the Customs Act, 1962. The notification exempts wholly or partially the duty of customs or additional duty leviable on the goods specified in First Schedule to the Customs Tariff Act, 1975. 3. The following question is framed by the applicant for the purpose of seeking advance ruling : Sl. No. Chapter/ Heading/ sub- heading no. Description of goods Standard rate Additional Duty rate Condition No. 399 9801 Goods required for - - (i)fertilizer projects;. 5% 10% (ii) Coal mining projects 5% 10% - (iii) (omitted) (iv) power generation projects including gas turbine projects(excluding captive pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. (I) Captive Coal Mine The Department of Coal, Government of India, has allotted Coal Block field of Chihttisgarh specifically to meet the requirement of the proposed power plant. The distance between the power plant site and the coal mine is 20 to 25 kms. The applicant submits that as per the provision of Coal mine Nationalization Act, 1973, coal mining can be undertaken by private sector companies only for certain specified purposes which includes generation of power. The coal will have to be used exclusively as fuel in the power plant. (ii) Coal Transportation System Coal from the captive coal mine will have to be transported to the power plant site through a conveyer system or a dedicated road. The coal transported from the mine will be received in the inplant coal handling system which feeds the coal to the boiler units. (iii) Water Transportation System: The Water Resources Department of the Government of Chhatisgarh has allocated to the applicant certain quantity of water to be drawn from River Mahanadi for usage in the proposed project. The applicant states that it will build, operate and maintain a system of adequate capacity for transporting, storage and han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Project and plant, it is pointed out are synonymous in the context and the word 'power plant' is used only to specify the capacity, but not to exclude other integral features associated with power plant. The scope of exemption cannot be whittled down to the goods required for the actual power plant. The notification which contains both the expressions 'power project' and 'power plant' must be read as a whole in keeping with the objective behind the exemption as apparent from the power policy of the Central Government. In that sense, the goods required for the project as a whole with all the requisite infrastructure, viz coal mine, water pumping and power evacuation systems should also qualify for exemption. If the notification cannot be so interpreted as to cover the other key elements apart from the power plant proper, the notification to that extent will be against the law because the notification issued by the Central Government should be in conformity with the policy/guidelines formulated by it. Such policy/guidelines which has the approval of the Cabinet cannot be bypassed by restricting the scope of exemption. 5.1 It is also contended that even the word 'plant' by itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry was introduced for the first time in 1999. As pointed out by the learned Sr. counsel for the applicant, the introduction of this Entry in the Customs notification seems to be a follow up to the policy decision taken by the Central Government as set out in the communication dt. 10-11-1995 addressed by the Secretary, Ministry of Power, Government of India and the revised policy/guidelines relating to Mega power projects issued in 1998. The policy formulated in 1995 was in relation to the "setting up of power plants of capacity of 1000 MW or more supplying power to more than one state". In that policy document, it is stated that the "project of capacity of 1000 MW and more and catering power to more than one state should be considered as a mega project. Projects which cater power to a single State, irrespective of size, would not come under this category". In the policy which has been recast in 1998, it was decided that inter-state and inter-regional mega power projects were to be set up both in the public and private sectors. The re-organization of the public sector power corporations was also envisaged by the policy. The policy contemplates the beneficiary States constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same excepting that the number of thermal and hydel projects specified in List 33 has gone down. 7.5 Then comes the Customs Notfn.No.21 of 2002 dated 1.3.2002 which is material for our purpose. It reads as follows : 7.6 Entry 400 was amended by the Notfn.No.26/2003. The said Sl. No. Chapter/ heading/ sub-head no. Description of goods Standard Rate Additional Duty rate Condition No. 400 9801 Goods required for setting up of any Mega Power Project specified in List 42, if such Mega Power Project is - (a) an interstate thermal power plant of a capacity of 1000MW or more; or (b) an interstate hydel power plant of a capacity of 500 MW or more, as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power Nil Nil 86 amendment was necessitated by reason of the policy decision taken by the Government as reflected in the Union budget speech of 2003-04. The following extract from the budget speech is relevant : "Simultaneous to the emphasis on improvement in power distribution, our attention on capacity addition remains. The Government had earlier, in 1999, notified 18 power projects as mega p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than those mentioned in clause (a). The specification of these criteria in the latter part of Entry 400, prefaced by the expression 'that is to say' fall in line with the power policy statement/guidelines of 1995 read with the policy recast in 1998. As explained later, the notification issued under the Customs Act is in conformity with those guidelines. The same pattern of identifying the particular types of power projects which needed incentives was followed in both. 8.1 It is true that the expression 'power project' is wider in ambit than power plant. At the same time, these two expressions are often used inter-changeably. Assuming that the expression 'power project' used in the opening part of the Entry 400 is something more than the power generation plant located within a particular premises, the question will arise whether it takes within its fold even the 'dedicated' coal mine and coal/water transportation systems. That question can be approached from the angle of the general concept of Power Project and its amplitude. However, without delving the issue from a general perspective, the answer could be found on having an insight into the setting and language of the Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd" were held to introduce, "the most general concept" when followed, inter alia, by the words "rights in or over land". We think that the precise meaning of the words "that is to say" must vary with the context. Whereas in Megh Raj's case, the amplitude of legislative power to enact provisions with regard to "land" and rights over it was meant to be indicated, the expression was given a wide scope because it came after the word "land" and then followed "rights over land" as an explanation of "land. Both were wide classes. The object of using them for subject-matter of legislation, was obviously to lay down a wide power to legislature. But, in the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression was apparently meant to exhaustively enumerate the kinds of goods on a given list". 8.3 The underlined proposition in the above passage as well as the last observation applies in all fours to the case on hand. In Entry 400, what follows after the words 'that is to say" are not illustrative instances but they are exhaustive of 'mega power project'. What is sought to be achieved by introducing the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oal mining project explicitly. That being so, if the Central Government wanted to draw a distinction between a stand alone coal mine and a dedicated coal mine, that should have been reflected in express language. A cloud of doubt could not have been allowed to disguise such an important aspect. The learned Sr. Counsel for the applicant submitted that the real reason for specifying the power plant in the second part of the Entry following, 'that is to say' was only to specify the capacity of the power plant which could qualify as a mega power project, so that the lesser capacity power plant may not be treated as mega power project. We find it difficult to accept this contention in the face of the language of the notification especially the use of expression, 'that is to say' which has received authoritative judicial interpretation by the time the Entry was introduced. 9. In the light of the above discussion, we cannot uphold the contention of the applicant that the power plant specified is only one facet of power project and the other allied facets viz. coal mine, coal transportation, water pumping/transportation systems are also comprehended within the scope of Entry 400. Such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation. In that case, their lordships were dealing with the exemption notification issued under section 7 of Bihar Finance Act. The Industrial policy resolution of 1993 published by the State Government, while announcing sales-tax exemption on the purchase of raw material, laid down that the old industrial units whose investment on plant and machinery did not exceed Rs.15 crores on 1.4.1993 shall be eligible for exemption for a period of 7 years from 1.4.1993. The respondent - assessee in that case started production prior to 1.4.1993 and availed of certain benefits under the prior policy of 1986. The notification issued under section 7 of the Bihar Finance Act on 4.4.1994 made the old industrial units such as those held by the respondent ineligible for sales-tax exemption on raw materials. The High Court allowed the writ-petition filed by the respondent for quashing the notification dated 4.4.1994 in so far as it denied the benefit of exemption to the old industrial units as it was opposed to the industrial policy decision of the State Government. The Judgment of the High Court was affirmed by the Supreme Court. The Supreme Court observed thus: "Coming to the second question, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we cannot reach the conclusion that the notification issued under the Customs Act fails to give effect to the relief announced by the Central Government in its 1998 power policy guidelines or that it falls foul of the policy. Nowhere in the revised policy guidelines issued in 1998, it was stated that the customs duty exemption would be made available not merely to the power plant equipment but also to the equipment needed for all the supporting infrastructure including the coal mine and coal transport. So much cannot be read into the compendious expression 'mega power project'. In fact, a perusal of the 1995 and 1998 policy statements gives an indicia that the Union government itself did not use the expressions 'power project' and 'power plant' in a distinct sense. In the letter of 1995 spelling out the policy, it is noted in the Preamble : "Setting up of power plants of capacity of 1000 MW or more….". In the 1998 revised policy guidelines, it was stated in the opening para : "guidelines for setting up of mega power projects of capacity 1000 MW or more…. were issued in 1995". Thus, no dichotomy was ever maintained between these two terms. A statutory notification cannot be const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention to the observations made by the Supreme Court in Union of India vs. Indian Charge Chrome 1994 (112) ELT 753. One of the questions considered therein was whether the Customs Notfn. No.133 of 85 which granted duty relief to the 'power projects' will include captive power plants. The notification was amended in the next year by adding an Explanation that power projects shall mean such projects whose end product is power, but shall not include captive power plants. The learned Judges of the Supreme Court held that this amendment was clarificatory in nature and the captive power plants were, in any case, not comprehended within the scope of the main notification. In that context, the Supreme Court observed that the word 'project' is much more extensive than a plant. Then, it was held : "The learned senior counsel for the appellant is right in submitting that power project could not have meant 'power plant' also and the scope for confusion or doubts, if any, was done away with by inserting a clarification". Far from supporting the contention of the applicant, the decision perhaps militates against its stand. Having regard to the context in which the expression 'power project' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'mega power project' had stood alone without being qualified by "that is to say", the argument based on Vikram Cement case would have deserved serious consideration. 14. The learned Sr. counsel for the applicant made a further submission that the term 'power plant' is itself comprehensive enough to include the captive coal mine etc which are essential for running the plant. He relied on the decisions interpreting the meaning of the word 'plant' under the Income-tax Act wherein the issue involved was about the admissibility of depreciation. Section 32(1) of the Income-tax Act, 1961 allows deductions in respect of "depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession". In the case of CIT vs. Taj Mahal Hotel(1971) 82 ITR 44 , the Supreme Court held that sanitary and pipeline fittings installed in a hotel fell within the definition of the term 'plant' under the old Income-tax Act. The following are the relevant observations : "To have sanitary fittings, etc., in a bathroom is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. If the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponents (whether finished or not) or raw materials for the manufacture of the aforesaid 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, 15.1 It is the contention of the applicant that the captive coal mine, coal transportation and water transportation systems apart from power evacuation system have an inextricable link with the power plant and therefore the goods required in relation to those interlinked items can be legitimately regarded as auxiliary equipment because they aid or help the setting up of the power plant. The applicant has referred to two decisions of the Supreme Court viz. CCE, Mumbai vs. Toyo Engineering India Ltd. (2006) 201 (ELT) 513 and Commissioner of CE vs. Paradeep Phosphates Ltd. (2006) 200 ELT 515 to elucidate the meaning of the expression 'auxiliary equipment'. 15.2 This contention is based on a wrong premise that the auxiliary equipment etc. covered by tariff item 9801 should be transplanted into Entry 400 of exemption notification no.21/2002. As already noted, the En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the policy recast in 1998, it was again declared that setting up of interstate and inter-regional mega power projects in public and private sectors was the policy of the Govt. Accordingly, the expression 'inter-state power plant' finds its place in sl.no.288A of Notfn.No.63/99 and the corresponding entries in subsequent notifications. In order to transmit power for use in other states, necessarily the applicant has to establish connection with the power grid's network at a place suggested by the Powergrid Corporation of India Ltd., which is a Govt. of India enterprise. Extracts from the Powergrid report are given in Annexure 7 to the application. 17.1 'Grid' means the high voltage backbone system of inter-connected transmission lines, sub-stations and generating plants (vide s.2(32) of the Electricity Act). Inter-state transmission system includes any system for the continuance of electricity by means of main transmission line from the territory of one state to another etc. (vide s.2(36) ). The Power Grid Corporation is a 'Central Transmission Utility' as per section 38(1) of the Electricity Act, 2003. The functions of the Central Transmission Utility are laid down in sub sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of 2002 and even earlier. 18. There is another aspect which has been highlighted by the applicant. It is pointed out that evacuation is an essential feature of a power generation plant as electricity cannot be stored. It is stated that the applicant is obliged to supply 7.5% of the total capacity of the plant to the Govt. of Chattisgarh at the agreed price and the balance power generated will have to be sold to the inter-state customers through the power grid. The power has to be released and transmitted up to the power grid network on continuous basis in order to make it available to other interstate customers. In this connection, the learned counsel for the applicant has drawn our attention to the observations of the Supreme Court in State of Andhra Pradesh vs. NTPC Ltd . The Constitution Bench of the Supreme Court observed thus : "However, A.N. Grover, J. speaking for three-Judge Bench of this Court went on to observe that electric energy "can be transmitted, transferred, delivered, stored, possessed etc. in the same way as any other moveable property". In this observation we agree with Grover, J. on all other characteristics of electric energy except that it can be 'sto ..... 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