M/S.Jindal Steel & Power Ltd vs Cce, Raipur

[Arising out of Order-in-Original No.Commr/RPR/117/2006 dated 27.11.2006 passed by the Commissioner of Central Excise, Raipur]

For approval and signature:

HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1. Whether Press reporters may be allowed to see the

order for publication as per Rule 27 of the CESTAT

(Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the

CESTAT (Procedure) Rules, 1982 for publication in

any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy

of the Order?

4. Whether Order is to be circulated to the Departmental

authorities?

__________________________________________________

M/s.Jindal Steel & Power Ltd. Appellant

Vs.

CCE, Raipur  Respondent

Present for the Appellant : Shri.Anurag Kapoor, Advocate

Present for the Respondent: Shri M.S.Negi, DR

Coram:HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 17/04/2015

FINAL ORDER NO. 51541/2015

PER: RAKESH KUMAR

The facts leading to filing of this appeal are in brief as under:-

1.1 The appellant during the period from July 2005 to May 2006 supplied certain iron & Steel angles channels Profile etc. to M/s. L&T Ltd. on account of M/s.Jindal Power against International Competitive bidding at nil rate of duty under Notification No.6/02-CE dated 01.03.2002 (Sl.No.301). The goods supplied by the appellant by availing of full duty exemption under this Notification were meant to be used for setting of 1000 Mega Watts thermal power plant by L & T for M/s.Jindal Power. Notification No.6/2002-CE dated 01.03.2002 (Sl.No.301) and its successor Notification No.6/06-CE dated 01.03.2006 (Sl.No.91) prescribes nil rate of duty to the goods of any Chapter supplied against international competitive bidding subject to the condition prescribed in the Notification. The condition prescribed during the period of dispute was that the goods which have been supplied against International Competitive Bidding are also exempt if imported into India from duties of customs leviable under first schedule of Customs Act, 1975 and also from additional customs duty leviable under section 3 of the said Customs Tariff Act. Notification No.21/2002-Cus. (Sl.No.400) exempted the goods required for setting up of any mega power projects, that is to say-

(a) An interstate thermal power plant of capacity of 1,000 M.W or more; or

(b) An interstate Hydel power plant of capacity of 500 M.W. or more,

as certified by an officer not below the rank of Joint Secretary to the Government of India in the Ministry of Power. This customs exemption was subject to the following conditions:-

 if an officer not below the rank of Joint Secretary to the Government of India in the Ministry of Power certify that  (i) The power purchasing state has constituted the regulatory commission with full power to fix the tariff ;

(ii) The power purchasing state undertakes, in principle, to privatise distribution in all cities, in that state, each of which has population of more than one Million, within a period to be fixed by the Ministry of Power; and

(ii) The power purchasing state has agreed to provide recourse to that states share of central plan allocations and other devolutions towards discharge of any outstanding payment in respect of purchase of power.

2. In the present case, there is no dispute that the goods were supplied by the appellant against international competitive bidding to M/s. L & T Ltd. on account of M/s.Jindal Power Ltd. and that the appellant have also produced certificate from Joint Secretary, the Ministry of Power certifying that -

 (a) that Raigar Thermal Power Project being set up by M/s.Jindal Power Ltd. is an interstate Thermal Power Plant of capacity of 1000 Mega Watt capacity and (b) also that - (i) The power purchasing state have constituted the regulatory commission with full powers to tariff and (ii) The power purchasing state undertakes in principle to privatize distribution in all cities each of which has a population of more than one Million. With regard to the third condition to be certified that the power purchasing state has agreed to provide recourse to that states share of central plan allocations and other devolutions towards discharge of any outstanding payment in respect of purchase of power, the Joint Secretary of the Ministry of Power under his letter dated 17.08.2005 clarified that this condition is not applicable in case of independent power projects and the power projects, in question, is an independent power project.

3. The Department was of the view that since the Joint Secretary to the Government of India in Ministry of Power has not certified in respect of the power project in question, that the power purchasing state has agreed to provide recourse to that states share of central plant allocation and other devolution towards discharge of any outstanding payments in respect of purchase of power, the conditions of the Customs Notification No.21/2002-Cus. are not fulfilled and, hence, the goods, if imported into India would not be eligible for customs duty exemption and hence the excise duty exemption would also not be admissible. It is on this basis that the Commissioner by the impugned order in original dated 27.11.2006 confirmed the duty demand of Rs.11,08,21,021/- alongwith interest on it under section 11AB and besides this, has imposed penalty of Rs.1.25 Crores on the appellant under Rule 25 of the Central Excise Rules 2002. Against this order of the Commissioner this appeal has been filed.

4. Heard both the sides.

5. Shri Anurag Kapoor and Shri B.L. Narasimhan, Advocates, the ld. Counsels for the Appellant, pleaded that the condition that the goods supplied against International Competitive Bidding and that the goods are to be used for thermal Power Project of 1000 Mega Watt which is an interstate thermal power are satisfied, that in terms of the condition of the Customs Notification No.21/2002-Cus, the Joint Secretary in the Ministry of Power has also given a certificate that the power purchasing state has constituted the regulatory commission with full power to fix tariff and that the state has undertaken, in principle, to privatize distribution in all cities in that state which have population of more than one Million, that with regard to the third condition of the condition No. 86 of the Notification No. 21/2002-Cus the Joint Secretary has clarified that this condition regarding the power purchasing state having agreed to provide the recourse to that states share of central plan allocation and other devolutions towards discharge of any outstanding payment in respect of purchase of power is not applicable to the project in question, as the same is an independent power project, that when this condition is not applicable, its fulfilment cannot be insisted, that in any case, when a central excise duty exemption under Notification No.6/2002-CE and 6/06-CE in respect of the goods supplied against international competitive bidding is subject to the goods being exempt from customs duty and the customs duty exemption is subject to certain conditions, the conditions applicable for customs duty exemption in respect of imported goods cannot be applied for central excise duty exemption and in this regard he relies upon the judgment of the Tribunal in the case of Kent Introl Pvt.Ltd. vs. CCE, Nashik reported in 2014 (301) ELT 84 (Tri-Mum.), that in any case when certain condition prescribed in the customs exemption notification is not applicable, the fulfilling of that condition cannot be insisted, in accordance with the principles of lex non cogit ad impossiblia, that in view of this the impugned order is not correct - more so, when the Commissioner in para 8.1.3 has accepted that there is no dispute over the fulfilment of condition No.86 (a) (i) and 86 (a) (ii) and the dispute is only about condition No. 86 (a) (iii) which has not been fulfilled, and that when the condition No.86 (a) (iii) is not applicable its fulfilment cannot be insisted and for non-fulfilment of duty exemption cannot be denied.

He, therefore, pleaded that the impugned order is not correct.

6. Shri M.S. Negi, the ld. DR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that the excise duty exemption under Notification No.6/02CE & 6/06-CE in respect of the goods supplied against International Competitive Bidding is applicable subject to condition that the same goods, if imported into India, are fully exempt from basic customs duty and additional customs duty, that the exemption in respect of the goods, in question, from basic customs duty and additional customs duty under Notification No.21/2002-Cus (Sl.No.400) is subject to the condition No.86 prescribed in the customs Notification, that condition No.86 has three parts, that when admittedly the condition No. 86 (a) (iii) is not fulfilled in the sense that the designated Officer in the Ministry of power has not certified that the power purchasing state has agreed to provide recourse to that state share of central plan allocation and other de-valuations towards discharge of any outstanding payment in respect of purchase of power, and instead the Joint Secretary has clarified that this condition is not applicable, this condition has to be treated as not fulfilled and hence the goods, in question, if imported into India would not be eligible for customs duty exemption and hence the excise duty exemption under Notification No.6/2002-CE and 6/06-CE would also not be admissible. He emphasised that it is well settled law that the duty exemption being exception to the normal rule had to be strictly construed. He also cited the judgment of Tribunal in the case of Audco India Ltd. vs. CCE, Chennai-III reported in 2013 (297) ELT 374 (Tri.) wherein the denial of excise duty exemption under Notification No.6/2006-CE to the goods supplied against International Competitive Bidding was upheld on the ground that the condition prescribed for duty free import of the same goods under Notification No.21/2002-Cus had not been fulfilled. He therefore, pleaded there is no infirmity in the impugned order.

7. We have considered the submissions from both the sides and perused the records. The goods supplied by the appellant during the period from July, 2005 to May, 2006  iron and steel items are made for use in Mega Power Project of M/s. Jindal Power Ltd. which is being setup by M/s. Larson & Tubro Ltd. There is no dispute that the power project - Raigar Thermal Power project for which the goods have been supplied is an inter state thermal power project of capacity of 1000 Mega Watt and in this regard the certificate has been given by the Joint Secretary to Govt. of India, Ministry of Power. There is also no dispute that the goods had been supplied against International Competitive Bidding. In terms of sl. No.301 of Notification No. 6/02-CE and 91 of the Notification No.6/2006-CE the goods of any chapter supplied against International Competitive bidding are fully exempt from Central Excise duty subject to condition that the same goods, if imported into India, would be fully exempt from basic Custom duty and additional customs duty. Sl. No.400 of the exemption Notification No. 21/2002-Cus exempts the goods imported which are required for setting-up of any mega power project, that is to say interstate thermal power plant of capacity of 1000 mega power or inter state Hydel Plant of capacity of 500 mega Watt or more, as certified by Joint Secretary in the Ministry of Power the whole of the basic customs duty and additional customs duty. However this exemption notification is subject to condition No.86 of the exemption notification which is that if an officer not below the rank of Joint Secretary to the Govt. of India in the Ministry of Power certifies that - (a) the power purchasing state has constituted the regulatory commission with full Power to fix Tariff (b) the power purchasing state under takes, in principle, to privatize distribution in all cities in that state which have population of more than one Million within a period to be fixed by Ministry of Power, and (c) the power purchasing state has agreed to provide recourse to that states share of Central plant allocation and other devolutions towards discharge of any outstanding payment in respect of purchase of power.

8. In the present case the concerned Joint Secretary in the Ministry of Power in the certificate issued by him in respect of power project, in question, has certified that the power project is interstate Thermal Power Project of capacity of 1000 Mega Watt and has also certified regarding fulfilment of the conditions 86 (a) (i) and (a) (ii) the condition No.86 and in respect of the condition No.86(a) (iii) the Joint Secretary in his letter dated 17.08.2005 addressed to M/s. Jindal has clarified that this condition has not applicable for independent power project. This fact has also been taken note of by the Commissioner in para 5.1.3 of the impugned order. When a particular condition prescribed in Notification No. 21/02-Cus. for full customs duty exemption is not applicable and for this reason, the condition cannot be satisfied, its fulfilment cannot be insisted in accordance with the principle of lex non cogit ad impossiblia which is applicable to the tax matters also. We, therefore, hold that the denial of exemption under Notification No.6/02 -CE and 6/06-CE on the ground that the goods imported would not be eligible for customs duty exemption under Notification No.21/03-Cus. is not correct.

The ld. DR has cited the Tribunal judgment in the case of Audco India Ltd. vs. CCE, Chennai-III reported in 2013 (297) ELT 374 (Tri.) In that case the goods had been supplied against International Competitive Bidding at nil rate of duty under Notification No.6/06-CE, but the department had denied the exemption on the ground that enduse certificate from the designated authority had not been produced which was the condition for full customs duty exemption under Notification No. 21/02-Cus. In our view this judgment of the Tribunal is not applicable to the facts of this case as in the case of Audco India Ltd. vs. CCE, Chennai-III reported in 2013 (297) ELT 374 (Tri.) for full customs duty exemption under Notification No.21/02 Cus the condition of production of enduse certificate had been prescribed and that condition not being an impossible condition, should have been fulfilled by the assessee for claiming the excise duty exemption. But in the present case the condition of the customs duty exemption which is being insisted is impossible to fulfill as the same is not applicable. In our view, it is the judgment of the Tribunal in the case of Kent Introl Pvt.Ltd. vs. CCE, Nashik (supra) which would be applicable to the facts of this case.

9. In view of the above discussion, the impugned order is not correct. The same is set aside. The appeal is allowed.

[Dictated & Pronounced in the open Court].

(S.K.MOHANTY) (RAKESH KUMAR)

MEMBER (JUDICIAL) MEMBER (TECHNICAL)

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