By TIOL News Service

MUMBAI, APR 25, 2014: M/S Nhava Sheva Port Trust (NSPT) now known as JNPT awarded a contract dated 15/12/1986 to M/s. Samsung Co. Ltd., South Korea for setting up the NSPT Port Project. In the said contract, NSPT has been termed as the ‘Employer' and M/s. Samsung Co. Ltd. as the ‘Contractor'.

Pursuant to the said contract, M/s. Samsung Co. Ltd. imported Container Handling Equipment and spares for NSPT Project between 1988 and 1990. However, before clearance of the goods, it sought to avail itself of the project import benefit under the Projects Imports Regulations, 1986. Accordingly, it applied for registration of the Contract to the then Assistant Collector of Customs Project Cell, New Custom House, Bombay vide its letter dated 12/09/1988.

The Asstt.Collr.registered the said contract provisionally subject to production of a recommendatory letter for duty concession from the concerned Sponsoring Authority, namely the Ministry of Surface Transport.

The goods were cleared under heading 98.01 of the Customs Tariff on payment of concessional rate of duty. Customs duties were paid by NSPT (as per the terms of the contract) for expeditious clearance of the goods.

However, M/s. Samsung Co. Ltd. failed to produce the required re-commendatory letter for duty concession from the Sponsoring Authority as also the reconciliation statement even after lapse of about two decades. As such, proceedings were initiated vide show cause notice dated 06/06/2011 calling upon both Samsung Co. Ltd. and NSPT to show cause as to why differential customs duty (i.e. difference between the finally assessed duty on merit rate and provisionally assessed duty at concessional rate) should not be demanded & recovered from them along with interest, and why the goods imported under the contract should not be confiscated and why they should not be penalized under the Customs Act.

The Commissioner confirmed the differential duty of Rs.48.30 Crores, ordered confiscation (giving the option of redemption on payment of RF of Rs.50 lakhs) and imposed penalty of Rs.5 crores each on NSPT/JNPT and Samsung Co. Ltd.

The appellant is before the CESTAT.

Revenue is also in appeal against the said order for the reason that though the adjudicating authority confirmed the duty demand, he failed to confirm the demand towards interest holding that interest cannot be demanded for the period prior to 13/07/2006 inasmuch as there were no legal provision for recovery of interest in the case of provisional assessment prior to the said date.

The appellant inter alia submitted -

++ In terms of the Project Import Regulations 1986, as it stood at the relevant time, there was no requirement of a recommendatory letter/certificate from the sponsoring authority or from the Director General of Technical Development.

++ The goods required for the project are covered by a licence issued by the Joint Chief Controller of Imports and Exports. Only in respect of the goods covered by an Open General Licence such a requirement was prescribed.

++ Recommendatory letter of the sponsoring authority was required only when the imports were made by government agencies. In the present case, the imports were made by M/s. Samsung Co. Ltd. only.

++ Vide Notification No. 142/92-Cus dated 10/03/1992, the Project Import Regulations were amended and the condition of recommendation or approval from DGTD or its sponsoring authority was made mandatory. Therefore, prior to 10/03/1992 there was no such requirement under the Project Import Regulations.

++ In the Foreign Trade Policy 1985-88, the Handbook of Procedures, in para 288, stipulated that for claiming concessional rate of Customs duty under Project Import Regulations, recommendation of the sponsoring authority concerned was required. However, this condition was removed from the Policy provisions for 1988-91 and the said para was deleted. Consequently, even under the policy provisions, there was no requirement of obtaining sponsoring authority's recommendation for claiming the benefit of Project imports.

The Special Consultant appearing for the Revenue inter alia submitted -

++ Vide leter dated 20/12/1988, M/s. Samsung Co. Ltd. informed the Customs authorities that they would be submitting the recommendatory letter from the Ministry of Surface Transport for availing the benefit of concessional rate for projects import within a month's time through JNPT and it was in these circumstances, the project was allowed to be provisionally registered and the concessional rate of customs duty under project import was extended.

++ M/s. JNPT had taken up the matter with the Central Board of Excise and Customs for waiving the requirement of recommendatory letter from MoST. However, the Central Board of Excise & Customs rejected the request of M/s. JNPT and directed them to approach Ministry of Surface Transport and obtain the recommendations. However, M/s. JNPT failed to obtain any such recommendation. In these circumstances, M/s. JNPT has to be held as the importer and not M/s. Samsung Co. Ltd. especially in view of the fact that the customs duty was undertaken to be paid by M/s. JNPT directly to the customs authorities and M/s. Samsung Co. Ltd. was only an agent of M/s. JNPT.

++ In the absence of a recommendatory letter from Ministry of Surface Transport, the benefit of concessional rate of duty under Project Imports could not be extended and the appellant is liable to discharge duty liability at normal rates and consequently confirmation of demand for differential duty of Rs.48.30 crore is sustainable in law.

The Bench observed –

++ Regulation 5 of the Project Import Regulations 1986, stipulating the documents required to be submitted for registration of the contract read as follows:

"The application shall be accompanied by the original deed of contract together with a true copy thereof, the import trade control licence, wherever required, specifically describing the articles licensed to be imported or an approved list of items from the Directorate General of Technical Development or the concerned sponsoring authority, in the case of imports covered by Open General Licence or imports made by Central Government, any State Government, statutory Corporation, public body or Government undertaking run as a joint stock company ."

++ This condition was amended w.e.f. 10/03/1992 to read –

"4) The application shall be accompanied by the original deed of contract together with a true copy thereof, the import trade control licence, wherever required, and an approved list of items from the Directorate General of Technical Development or the concerned sponsoring authority."

++ Prior to 10/03/1992, the importer was required to submit a copy of the contract, the import trade control licence specifically describing the articles licensed to be imported. The requirement of producing recommendatory letter from DGTD/sponsoring authority was required only in respect of imports covered by Open General Licence or imports made by Central Government, State Government, statutory Corporations, public body or government undertakings run as a joint stock company. The said requirement was not mandated if the goods were covered by an import trade control licence or the imports were made by importers not covered by the above category of persons.

++ When the imports were made by non-governmental authorities Para 288 of the Handbook of Procedures of the Foreign Trade Policy stipulated a condition that for the grant of project import benefits, recommendation from the sponsoring authority was required in addition to the licence. However, this condition was in existence only in the policy provisions relating to 1985-88 and the said condition was deleted when the policy provisions relating to 1988-91 came into force w.e.f. 01/04/1988. The period of imports in the present case is after 01/04/1988. Therefore, what should be relevant is the policy prevailing at the time of importation and as per the policy prevailing at the time of importation there was no requirement of obtaining any recommendation from the sponsoring authority.

++ Thus, both in terms of the Project Import Regulations, as also in terms of the Foreign Trade Policy, there was no requirement of obtaining any recommendation letter from the sponsoring authority and hence this stipulation by the Customs authority on the basis of a public notice issued by them is not sustainable in law.

The Bench, therefore, held that the appellant is rightly entitled for the benefit of Project Import Regulations. Consequently, the demand of differential duty, confiscation, imposition of redemption fine, penalties was held as unsustainable in law. The appeal was allowed.

The Revenue appeal seeking imposition of interest was, therefore, dismissed.

(See 2014-TIOL-638-CESTAT-MUM)