DABHOL POWER COMPANY Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) Appeal No. C/601/2001 filed by the importer M/s. Dhabol Power Co. (DPC) is directed against order passed by the Commissioner of Customs, Pune, dated 25 -10 -2001. Appeal No. C/519/2000 at the instance of DPC and Appeal No. C/520/2002 at the instance of Chief Commissioner of Customs, Pune are against the order passed by the Commissioner of Customs (Appeals), Pune, dated 26 -6 -2000. Since the issues in the above appeals are inter linked and the imports which are subject matter of the appeals are made by DPC, we heard the appeals together and they are being disposed of under a common order.

(2.) Under order dated 25 -10 -2001 the Commissioner held that the various items of equipment, machinery etc. imported for the Liquefied Natural Gas (for short, LNG) facility are not entitled to assessment under Tariff Item 9801.00(3) as well as under Tariff Item 9801.00(1) as project imports. It was also held that a portion of the value of the off -shore services contract is liable to be added to the declared value of the equipment etc. imported for the LNG facility. On the above basis provisional assessment was finalized and demand of duty of Rs. 245,58,73,987/ - was upheld on imports effected and cleared under 319 Bills of Entry. There is also a demand of Rs. 8,30,94,084/ - in respect of certain goods that have been assessed provisionally but are pending clearance and a demand of Rs. 21,44,77,666/ - on items imported under 63 Bills of Entry that are pending assessment and clearance. The learned Commissioner also held that all items imported for LNG facility are liable for confiscation under Section 11(m) of the Customs Act, 1962 for alleged misdeclaration and he imposed redemption fine in lieu of confiscation of an amount of Rs. 1,33,54,841/ - on items which are pending clearance/assessment. He further imposed a penalty of Rs. 45 crores on the importer/appellant under Section 112(a) of Customs Act, 1962.

(3.) In Revenue's Appeal No. C/520/2000, challenge is against an order passed on appeal filed by DPC against an adjudication order passed by -Commissioner (Appeals), Pune, dated 26 -6 -2000 on an appeal filed by DPC against adjudication order passed by the Assistant Commissioner of Customs, Dapoli Division dated 15 -1 -99. Under the above order the adjudicating authority took the view that various machinery and equipment imported for Single Point Mooring (SPM) system are not covered under Heading 9801.00 as a project import and a differential Customs duty of Rs. 33,29,22,069/ - was demanded. It was held that SPM system which was a system of unloading of fuel from tanker and transporting it to fuel storage tanks installed at the project site is not integrated to the project of generation of power. He also took note of the fact that power project ultimately is to be fueled by LNG facility for which a separate LNG facility was being constructed and therefore, at the second stage SPM system will normally lie idle. It has only the function of temporary facility and therefore not an integral part of power project. On appeal, the Commissioner took the view that SPM system attains the character of integral part of the project approved by various sponsoring authorities and which has been registered in 1996 under Project Import Regulation, 1986 without any objection. According to the Commissioner (Appeals) as a result of the restrictions imposed by the Government of India that the appellant should not use the infrastructure facilities of public sector canalizing agencies and existing port infrastructure for the import of fuel, they were compelled to find a source of supply fuel which has to be imported and this could be done only with the help of SPM system. Therefore, according to him, the SPM system became a part and parcel of the project. He also took the view that having registered the project under Project Regulation, 1986 it would qualify for classification under Chapter 98.01. Taking into consideration the submission made by the appellants that even after commissioning of Phase II, SPM would not remain idle and would be used as back up system, the Commissioner took the view that SPM system would qualify for project import as an auxiliary system or an integral part of the project. However, after holding as above, the Commissioner remanded the matter to the adjudicating authority with a direction "to consider the assessment of SPM appropriately while finalizing the provisional assessment after examining its role in the second phase and thereafter decide the matter appropriately". The Revenue has come in Appeal C/520/2000 against the above order contending that finding entered by the Commissioner (Appeals) that SPM system would qualify for project import as an auxiliary system for an integral part of the project, cannot be sustained. DPC has filed appeal No. C/519/2000 challenging that part of the order of the Commissioner where he remands the case directing Assistant Commissioner to finalize the provisional assessment of SPM after considering its note in the second phase.