ORDER
S.S. Sekhon, Member (T)
1. The appellants, registered themselves under ‘Project Import Regulations, 1986’ (hereinafter referred to as PIR), at the Customs House, Kakinada, for import of power equipments and including suppliers for installation and erection of power plant, to implement project which they had entered into for setting up a power plant for Andhra Pradesh Electricity Board.
2. They imported, somewhere in May 1999 a gas turbine and generator in semi-knocked condition in 128 packages cleared the same on a Bill of Entry No. 109/20.5.99, under Chapter heading 9801 of Customs Tariff for Project I importer. Out of the 128 packages, certain equipments due to its dimensions, had to be carried by sea to Machilipatnam. They were loaded on a barge, which set out on coastal voyage on 1.6.99. Due to rough weather on 2.6.99, the barge capsized and overturned, resulting into total loss of the so imported gas turbine and generator loaded thereon. Replacements for the same were ordered and once again cleared under PIR.
3. For the goods lost/destroyed at sea on 2.6.99, a Show Cause Notice dtd. 23.4.2001, was issued to them asking to show cause why duty amounting to Rs. 19,64,03,562, should not be recovered from them on the goods under the proviso to Section 28(1) of the Customs Act, 1962. This notice proceeded on the bases that since the two packages containing gas turbine and generator had been lost at sea and not used in the project, they would be classifiable under relevant Chapter headings covering those goods and since they had paid a lesser duty under Chapter Heading 9801, the differential duty was as worked out, required to be paid The notice did not have any proposal for the classification or finalization of assessments made under PIR.
4. It appears that the appellants in their written reply submitted that the notice was not maintainable, as Section 28 of the Customs Act could not be invoked when the assessment was provisional in terms of Section 18 of the Customs Act. Several decisions were cited in this regard. It was also submitted that there was no justification in invoking the proviso to Section 28 of the Act as there was no suppression or wilful mis-statement by the appellants. As regards merits, it was submitted that PIR did not stipulate that the assessment under the said Heading was subject to installation or commissioning or commercial operation of the project. The classification of goods under Tariff Heading 98.01 was only to facilitate the assessment of the goods under a single Tariff entry. Reference was made to the Regulation 3 of PIR and the tariff description of Tariff heading 98.01. It was also submitted that Regulation 7 provides for finalization of contracts within 3 months from the date of clearance for home consumption of the last consignment of goods The said Regulation did not lay down the requirement of installation or commissioning of the machinery imported under PIR. Reference was also made to the genesis of Project Import assessments in erstwhile Tariff Heading 84.66. It was submitted that the condition precedent for assessment under PIR is the registration of contract with the Customs authorities. On the basis of the above grounds, it was submitted that there was no justification for demanding the differential duty on the gas turbine and generator lost at sea, on the ground that the equipment d id not reach the project site for their installation or commissioning. Reference was made to Hindustan Petroleum Corporation Ltd. v. CCE, Madras 1998 (102) ELT 210 when the benefit of PIR was extended to replacement materials, imported in place of earlier imported but damaged materials.
5. The Commissioner passed an order dtd. 31.12.2001, confirming the demand of Rs. 19,64,03,562 but refrained from imposing any penalty on the appellant. In Para 27 of the Order, it was mentioned that the assessments were provisional and the Commissioner sought to finalize the same under the Provisions of Section 5(2) of the Act even though the notice was issued under Section 28(1) of the Customs Act read with the proviso there under and there was no proposal to finalize the provisional assessments. Para 17 of the impugned order recognizes that the last consignment of the Project was yet to be received by the appellant.
6. We have heard Ld. senior Advocate for the appellants and the Ld. SDR for Revenue, considered the submissions made and find:
(a) There is no doubt that the goods have been irretrievably lost and therefore destroyed, due to a sea storm. The goods are, thus, not available for the purpose for which they were imported viz, installation in the power plant project. The Commissioner has applied the test of installation only, and has finalised the assessments of the present import, even though the last consignment was still to be imported. This is not possible and cannot be done. The assessment here to be finalised only after the last consignment has arrived and Regulation 7 of the PIR has been complied. The Commissioner has passed the impugned order on 31.12.2001, even before the receipt of installation Certification from the Deputy Commissioner of Customs, Kakinada for the goods contained in 128 kgs. which were imported along with the gas turbine and generator. He has concluded ‘considerable negligence’ on the part of the appellants to take precautions for safe passage of goods by sea to Machilipatnam to deny the benefit of assessment under the project imports.
(b) The Ld. Advocate for the appellants had relied upon the decision of this Tribunal in the case of Collector of Customs, Cochin v. Autocast Ltd. , which stipulates, that replacement parts could be allowed to be imported subject to the condition that original parts are returned to the supplier or destroyed in the presence of Customs, by relying on the decision and conclusions reached by Commissioners of Customs in conference on Tariff held in September 1995 at Calcutta, The portion of the conference’s conclusions is as follows:
Conference deliberated on the issue in detail, and decided that if the project has not gone into commercial production, the replacement of parts/equipment should be allowed at project rates subject to the condition that original parts are returned to the supplier or destroyed in presence of Customs. Conference also opined that even during the course of trial run if any part/equipment is found damaged, that should also be allowed to be replaced at project rate and attested list from Administrative Ministry should not be insisted for such replacements.
In the present case, the goods obviously cannot be returned to the suppliers having been destroyed due to vis major. We do not share the Commissioner’s views on ‘culpable contributory negligence’ of the appellants. Merely because the goods were not destroyed in the presence of the Customs officers, that would not disentitle subsequent imports and/or is presumption/or non-entitlement of the project import rate of duty under Heading 9801 of the Customs Tariff to the earlier imports. The goods have not been found in this case to have been diverted for any other use. We therefore cannot persuade ourselves to approve the Revenue’s contention that the subject goods, which cannot be installed, as they are lost due to reasons beyond the control of the appellants and/or thus not used in the power project, should be charged to duty at the rate applicable for normal imports of such items under the Customs Tariff. When we find that the collective wisdom of Commissioners Conference is to permit the destruction or re-export of such goods imported under PIR, which cannot be used for the Project. The Ld. DR took us through the decision of Jacsons Thevars to submit that the duty liability would arise when goods are not used in the project for which the assessments were made. We have considered the submissions and perused the decision. The conclusion of Conference of Commissioners, which has the approval of the Central Board of Customs as it has been endorsed for action to all Customs Houses, would bind the Revenue, even if Jacsons Thevara’s case of Supreme Court prescribes levy of differential duty. We rely on the Supreme Court decision in the case of Paper Products Ltd. 1999 (34) RLT 365 (SC) & CCE, Vadodara v. Dhiren Chemical Industry 2001 (47) RLT 881 (SC) in coming to the conclusion. A perusal of Jacsons Thevara case, would also show, that in that case the imported machinery was cleared for a particular project at concessional rate of duty and was transferred and used by another company for setting up a new unit. There was no question of the imported goods in that case being damaged/destroyed by natural causes or a desire rendering them not to be used in Project, as envisaged in the Commissioner’s Conference conclusions. Therefore, we do not find Jacsons Thevara’s case to be applicable in this matter. The directions, concluded in the Commissioners Conference have to be implemented. We find no reason to confirm the differential demands of duty as made in the impugned order.
(a) The Ld. senior Advocate for the appellants took us through various other submissions as regards the assessment not being provisional and the same cannot be re-opened as once classification under 9801 has been approved, and goods cleared under PIR. In view of Jacsons Thevara’s case, Supreme Court (supra), we do not find any reason that there could be an embargo to recover the differential duty on goods cleared at concessional rate for projects under PIR. However, this decision when read harmoniously with the Commissioner’s Conference conclusions would indicate, when goods are not used elsewhere in India or are destroyed, in such conditions, there is no additional liability for differential duty. Liability would arise, only in cases of PIR clearances being used for purposes other than the Projects Registered.
(b) The submissions on other issues in this case of the Commissioner having exercised powers under Section 5(2) of the Customs Act and that the last import of the Registered Project was not finalised and, therefore, there cannot be partial finalization of Provisional Assessment of Project imports. Bills of Entry are not being considered and no findings thereon are being arrived at in view of our finding that a demand in the facts of this case could not be made. All other issues are left open, including the jurisdiction of the Project Import Registered by the proper officer.
7. In view of our findings, the order of demand of duty is set aside and appeal disposed of in above terms.