ORDER
Jyoti Balasundaram, Vice President
1. In this case, the authorities below had denied the benefit of Nil rate of Customs duty in terms of serial No. 226(1) of Notification No. 11/97 -Cus dtd. 1.3.97 to the appellants herein on the ground that they are more appropriately covered by Serial No. 226(iii) of the above Notification as captive power plants 5MW and above and therefore, they are chargeable to 20% of Customs basic duty and additional duty of customs of 13%.
2. On hearing both sides, we find that the issue in dispute stands settled by the Apex Court decision in Zuari Industries Ltd v. CCE &C , wherein the benefit of Nil rate of duty has been extended to M/s. Zuari Industries Ltd. treating the project as fertilizer project and set aside the order of the Tribunal by which the benefit of concessional rate in terms of Sr. No. 226(iii) for capital power plant 5 MW and above was extended. The Supreme Court has held that the Sponsoring Ministry had considered that for the expansion of fertilizer project the appellants require an extra item of capital goods viz. 6 MW Captive Power Plant, that essentiality certificate is also a proof that an item like captive power plant in a given case could be treated as a capital goods for the fertilizer project, that if a project is to be installed in an area where there is a shortage of electricity supply and if the project needs continuous flow of electricity and if that project is approved by the Sponsoring Ministry saying that such supply is needed, then the Revenue can not go behind such certificate and deny the benefit of exemption from payment of duty or deny nil rate of duty. Paragraphs 9 & 10 of the Apex Court judgment are reproduced below for better appreciation of the case:
(9) Firstly, on the facts we find that the assessee had given to the Sponsoring Ministry its entire Project Report. In that report they had indicated that for the expansion of the fertilizer project they needed an extra item of capital goods, namely, 6 MW Captive Power Plant. In their application, the assessee had made it clear that the fertilizer project was dependant on continuous flow of electricity, which could be provided by such Captive Power Plant. Therefore, it was not open to the Revenue to reject the assessee’s case for nil rate of duty on the said item, particularly when the certificate says so. In the judgment of this Court in the case of Tullow India Operations Ltd.(supra) this Court held that essentiality certificate must be treated as a proof of fulfillment of the eligibility conditions by the importer for obtaining the benefit of the exemption notification. We may add that, the essentiality certificate is also a proof that an item like Captive Power Plant in a given case could be treated as a capital goods for the fertilizer project. It would depend upon the facts of each case. If a project is to be installed in an area where there is shortage of electricity supply and if the project needs continuous flow of electricity and if that project is approved by the Sponsoring Ministry saying that such supply is needed then the Revenue cannot go behind such certificate and deny the benefit of exemption from payment of duty or deny nil rate of duty. To the said effect is the judgment of the Calcutta High Court in the case of Asiatic Oxygen Ltd.(supra) in which it was held that the object behind the specific Heading 98.01 in Customs Tariff Act, 1975 was to promote industrialization and, therefore, the heading was required to be interpreted liberally. It was further held that, once an essentiality certificate was issued by the Sponsoring authority, it was mandatory for the Revenue to register the contract.
10. Secondly, before us, it has been vehemently urged that although the essentiality certificate stood issued by the Sponsoring Ministry, there is non-application of mind by that Ministry with regard to the list of items appended to the certificate. According to the Department, the said list has not been countersigned by the competent authority in the Sponsoring Ministry. We do not find any merit in the said contention. The list consists of 14 items. The department has accepted 13 out of 14 items as capital goods required for the fertilizer project, therefore, it cannot be said that the Sponsoring Ministry had not applied its mind to the list appended to the essentiality certificate. This point needs further clarification. The power plant in the conceptual sense or in the technical sense is certainly different from the fertilizer plant. However, when we come to Heading 98.01 of the Customs Tariff Act, 1975, the assessment is for the Project. As stated above, Heading 98.01 is the specific entry applicable in the case of the Project Imports. An item like a power plant could be in a given case an independent plant. Generally, it is a stand alone equipment. However, when it becomes a part of the entire Project/System, the same power plant can also become one of the items of capital goods. The essentiality certificate given by the Sponsoring Ministry has treated Captive Power Plant, in this case, as “capital goods” along with 13 other items. The assessee has also treated the Captive Power Plant as one of the capital goods required for the expansion of the fertilizer project. In the above circumstances, all the items in the list annexed to the certificate have been certified and recommended by the Sponsoring Ministry as the entire capital goods required for the substantial expansion of the fertilizer project. Therefore, in our view, the assessee is right in its contention that, in this case, 6 MW Captive Power Plant is one of the items out of 14 items constituting capital goods required for the substantial expansion of the fertilizer project, and, therefore, it fell under Serial No. 226(i) as goods required for the fertilizer project entitled to the benefit of nil rate of duty.
2.1 The ratio of the above judgment is squarely applicable to the facts of the present case, wherein, there is an essentiality certificate issued by the Sponsoring Authority as well as a letter dated 2.6.1997 by Projects & Development India Limited to the effect that continuous supply of power is necessary for the fertilizer project of the appellants. We, therefore, set aside the impugned order by which the benefit of Nil rate of duty is denied and allow the appeal with consequential relief to the appellants in accordance with law.
