GMR ENERGY LTD. Vs. COMMISSIONER OF CUSTOMS, BANGALORE

JUDGEMENT

(1.) Two appeals have been filed against the impugned judgment dated 3.8.2007 passed by CESTAT. The appeal filed by the assessee M/s GMR Energy Ltd. concerns itself with the proper valuation of the import of parts of the Gas Turbine Hot Section of a naphtha based power plant which have to be replaced after 12,500 fired hours of use under a Long Term Assured Parts Supply Agreement (hereinafter referred to as "LTAPSA") dated 20th December, 2000 entered into with GE, USA. The appeal of revenue concerns itself with whether the assessee is entitled to avail itself of the benefit of the exemption notification No.21 of 2002 dated 1.3.2002 in respect of the goods imported under two bills of entry dated 25.6.2003.

(2.) The appellant had imported a naphtha based power plant with five gas turbines which was mounted on a barge which floated in a river at a Tanir Bavi Village near Mangalore for purposes of power generation. The capacity of the said power plant is 220 MW and the entire power generated is uploaded into the grid of the Karnataka Power Transmission Corporation Limited. The power plant had to be kept in good running condition as the contract with KPTCL is to supply power to them continuously. For this purpose, the appellant entered into an agreement for service and supply of parts with GE, USA being a Long Term Assured Parts Supply Agreement dated 12.12.2000, (hereinafter referred to as "LTAPSA"). In terms of the said agreement, the appellant was to make payments based on either fired hour charges or maintenance charges. Various parts of the Gas Turbine Hot Section of the said plant, which had to be imported under the LTAPSA were imported under two bills of entry dated 25.6.2003 after 12,500 fired hours had come to an end. The parts that were identified as having to be replaced were re-exported back to GE, USA under cover of shipping bills of the month of May, 2003 before the two bills of entry dated 25.6.2003 were presented for import of the replaced parts to the customs authorities. The appellant paid customs duty based on the value declared in the said bills of entry but did not make any payment to GE based on these invoices since their payments had already been made based on fired hour charges. The assessment of the said import was completed by the customs department after due verification of the documents produced at the time of import.

(3.) Subsequently, by a show cause notice dated 12.8.2004, the customs department sought the aid of Rule 4(2)(g) and Rule 9(1)(d) and 9(1)(e) as they stood at the relevant time in order that 1/3rd of the value of the imported items be added to the invoice value as that was said to represent the amount of the parts that were replaced and re-exported back to GE, USA. The show cause notice essentially based itself on statements made by one Shri Naresh Manchanda, Finance Manager of the appellant and Shri Siddharth Deb, Associate General Manager of the Company. It stated: