2006(05)LCX0038

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI, COURT NO. I

Jyoti Balasundaram, Vice President and Dr. C. Satapathy, Member (Technical)

Commissioner of Customs (Import), Mumbai

Versus

Gujarat State Fertilizers & Chemicals Ltd.

Order No. A/360/WZB/06.C-I. (C.S.T.B) decided on 08.05.2006 in Appeal No. C/122/04

Advocated By -

M.I. Sethna, Sr. Adv. for the Appellant
Wiilingdon Christian, Adv. for the Respondent

JUDGMENT

Jyoti Balasundaram, Vice President

1. The revenue is in appeal against the order of the Commissioner of Customs (Appeals) extending the benefit of project import to electro generator and parts thereof imported by the respondents herein.


2. The brief facts of the case are that the respondents had got registered a contract for setting up of ammonia plant for which capital goods are imported. The project was completed in 1999 and reconciliation statement was submitted. The department was of the view that the benefit of project import is not available to electro- generator and on this basis a show cause notice was issued to the importers on 21st May, 2002 proposing recovery of duty of Rs. 9.16,26,038 by denying project import benefit. Another show cause notice dated 22nd August, 2002 was Issued proposing recovery of duty of Rs. 14,05,01,617 in respect of further 9 bills of entry. The notices were adjudicated by order dated 27th June, 2002 upholding the demands. The importers challenged the order before the Commissioner (appeals), who remanded the case for fresh decision The dy. commissioner heard the matter afresh and passed orders on 30th May, 2003 denying the benefit of concessional assessment under customs tariff Heading 98.01 of Customs Tariff Act, 1975 read with Project Import Regulations 1936, available for fertilizer projects in respect of 8 Bs/E noted after the amendment of notification No. 36/96 on 23rd July, 1996. He ordered assessment of goods covered by 8 Bs/E on merits and directed payment of differential duty off Rs. 12,45,20,218 being the difference of duty paid at the time of clearance of the goods and the duty payable on merits assessment. He held that goods covered by 4 Bs/E noted prior to the amendment to notification Na 36/96 were eligible to the benefit of project import. The Commissioner (appeals) set aside the order of the Dy. Commissioner holding that the importers were entitled to the benefit of concessional rate of duty. Hence this appeal by the revenue.

We have heard both sides.


3. The case of the department as set out in the memorandum of appeal is that the electro - generator imported by the respondents is a captive power plant for all practical purposes for the following reasons:

(i) It has been imported for efficient energy management by utilising medium pressure steam and low pressure steam generated through heat exchanges and since it cannot run only on medium pressure steam and low pressure steam so generated, import of medium pressure steam from outside sources is necessary. The import is from the respondents' utility plant situated outside the ammonia plant;

(ii) The electro-generator generated approximately 20 MW of electricity at full capacity and since the electricity required to run the ammonia plant is in excess of that capacity, some electricity is imported from the grid to run the plant;

(iii) There is no back up for low pressure steam;

(iv) Captive power plants are those which generate electricity for captive consumption only and the respondents' claim that electro-generator imported by them is different from a captive power plant in that it is not using any additional fuel to generate electricity, is not tenable since they are importing medium pressure steam from their utility plant.


5. On the other hand, the contention of the respondents through but has been that while a captive power plant is always intended to supplement the power requirement of the plants and is an additional source of power to tide over any likely deficit in irregular power supply in the plant which is completely Independent of other plants, the electro generator is not a captive power plant. Their submission is that in the ammonia plant under reference, during burning of fuel to heat feed stock in the steam reformer, fuel gases are generated at a temperature of 1000 degree centigrade and if these fuel gases are vented out in the atmosphere it will cause environmental disaster and colossal waste of national resources and that with the advancement of technology it is also possible to tap this rich source of heat energy for productive purpose. They state that in the ammonia plant, there is an inbuilt and integral mechanism incorporating steam turbine based on the state-of-art technology so that the entire source of the heat energy generated in the form of fuel gases and other exothermic reactions is harnessed and put back into the main steam system by production of steam for driving compressors, pumps and generators. They highlighted the fact that the electro-generator and its functioning in the ammonia plant is inter-dependant and not independent of each other, unlike a captive power plant. The above contentions are based on a report dated 14th May, 2002 of the Chartered Engineer, institute of Engineers, Kolkatta. We note that this report was produced by the respondents before the Dy. Commissioner of Customs in the first round of proceedings, i.e., before the passing of the order-in-original dated 27th June, 2002 by which the benefit of project import was denied. We also note that the Ministry of Chemicals and Fertilizers, Government of India, New Delhi, which is the Nodal Ministry for the respondents has recommended that the import of electro-generator is exempted from the customs duty under notification No. 11/97 dated 1st March, 1997 as amended from time to time on the ground that it is an integral part of ammonia plant based on Linde's process technology utilising waste heat energy generated in the process and therefore, "In situ utility power generation" cannot be equated with captive power generation. Linde AG, manufacturer of the ammonia plant imported by the respondents has also certified that their plants are designed so as to save India's valuable energy resources and environment friendly that each kind of energy utilised by the process will be recovered and not be wasted and that the waste heat available is recovered in the form of steam which is converted into electrical power by using a turbo generator, that this energy is used in the plant itself and that the energy management is designed only for improving the economical factor of the process and is not a captive power plant design). Further, the finding of the Commissioner (appeals) that the most important condition for a captive power plant is that it should be completely independent of other plant and it should be capable of running or being shut down on its own and turbo generator is not capable of being run independently, has not been challenged in the appeal.


6. In the light of the above, we are of the view that the revenue has not succeeded in dislodging the finding of the lower appellate authority that the turbo generator under reference is eligible for project import benefit under customs tariff Heading 98.01. We, therefore, uphold the impugned order and reject the appeal.

Equivalent 2006 (109) ECC 0074

Equivalent 2006 (135) ECR 0074 (Tri.-Mumbai)

Equivalent 2006 (076) RLT 0933 (CESTAT-Mum.)

Equivalent 2006 (206) ELT 0952 (Tri.- Mumbai)