Cus - Since Project Import Regulations, 1986 do not mandate any condition that importer should have entered into a contract with foreign supplier, same cannot be imposed by Customs Manual: CESTAT
By TIOL News Service
MUMBAI, JUNE 19, 2018: THIS is a Revenue appeal against the order passed by the Commissioner of Customs (Appeals), Mumbai.
The respondents M/s HCC and M/s NCC entered into a Joint Venture and were eventually granted the bid for execution of work under "Phase II of J. Chokka (HCC-NCC JV) Rao Godavari Lift Irrigation Scheme" by the Irrigation & C.A.D (PW) Department, Government of Andhra Pradesh.
They sub-contracted the work (to M/s Jyothi Ltd.) for design, supply, model study, manufacturing, supply, erection, testing commission, operation and maintenance of electro-mechanical package for the initial setting up of the Godavai Lift Irrigation Scheme.
In the meanwhile due to financial constraints of M/s Jyothi, NCC and HCC opened the LC with the foreign suppliers and made an application for registration under the project import under the category water supply project.
The Adjudicating Authority denied the registration holding that there was no contract between the importers and the supplier and that the project is an ‘irrigation project' and not a ‘water supply project'.
The Commissioner(A) set aside this order and, therefore, Revenue is in appeal before the CESTAT.
It is mainly argued that while the original contract was between Jyothi Ltd and foreign supplier, the respondents cannot be registered under Project Import Regulations, 1986 as there exists no contract between the importer M/s. HCC / M/s NCC and the foreign supplier.
The respondent inter alia submitted that the department's appeals be dismissed without going into the questions raised by the Department in view of the decisions in Jain Irrigation Systems Ltd. - 2015-TIOL-1451-CESTAT-MAD (affirmed by Supreme Court) & Eddy Cranes Engineers 2018-TIOL-542-CESTAT-MUM.
The Bench observed that the issues that need to be decided are -
i) Can the appellants be granted registration when they are not direct party to the import contract?
ii) If yes, then are the items imported by them classifiable as Irrigation project under heading 98010012 or as Water Supply Projects notified vide notification no 42/96–Cus. dt.23.7.96 under heading 98010019?
iii) Are the appellants entitled to benefit of the exemption notification 14/2004-Custom dated 8.1.2004?
After extracting regulation 4 to Project Import Regulations, 1986, the Bench observed -
"The regulation does not require the importer to enter into contract with foreign supplier. It merely requires existence of a contract under which imports are made. Revenue is relying on the para 3 of Chapter 5 of the Customs Manual which states that the importer should have entered into contract with the foreign supplier. We are of the opinion that if the Project Import Regulation, 1986 do not mandate any such condition, the same cannot be imposed by the terms of Customs Manual. Thus we hold that the Project can be registered under the regulation by the Appellants even if the appellants are not a direct party to import contract."
Insofar as classification of the goods are concerned, the Bench adverted to the letter dated 26.2.2007 of the Superintendent Engineer addressed to District Collector Warangal and observed –
"…in the entire project of Irrigation we are concerned with only the part of the project relating to ‘Water Conductor System'. This ‘Water Conductor System' only relates to the lifting of water from one point and through pump houses and pipelines supplying to the recipient tanks at destination…Thus it cannot be called an irrigation project but it can only be called a Water Supply project in that sense…"
4.4 In the instant case the entire irrigation project has not been imported. Just one component of the irrigation project has been imported therefore the ratio of the said decision [Zuari Industries Ltd. - 2007-TIOL-55-SC-CUS does not apply. Had the complete irrigation project been imported then all components forming part of the irrigation projects would have been classified as irrigation project. In view of above we hold that the project would be classifiable as ‘Water Supply Project'. Since the project is classifiable as ‘Water Supply Project' the benefit of the notification 14/2004-Cus will also be available."
Concluding that there is no merit in the Revenue appeal, the same was dismissed.
(See 2018-TIOL-1882-CESTAT-MUM)
