The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the import of assemblies, sub-assemblies, components, and sub-components of iron and steel by Tata Steel under the Export Promotion Capital Goods (EPCG) scheme are allowed as spares under the Foreign Trade Policy (FTP).
Tata Steel Ltd, the appellant assessee engaged in the manufacture of iron and steel having its largest production facility in Jamshedpur, wherein the assessee had commissioned seven blast furnaces referred to as “A” to “G” having aggregate capacity of 5 million Million Tonnes Per Year (MPTA) and sought to enhance the capacity of its blast furnace upto 10 million MPTA and thus conceived the plan to install “H” blast furnace and “I” blast furnace of 2.5 million capacity each.
The assessee appealed against the order passed by the adjudicating authority for confirming the Customs duty demand of Rs. 32,76,67,821/- on the revised assessable value of the goods imported during the period 22.11.2006 to 22.11.2007, determined under Section 28(8) of the Customs Act, 1962.
Gajendra Jain, Narendra Dave, Rahul Tangri, Udita Saraf, P. R. Renganath, and M. Kannan, the counsels for the assessee contended that the assessee had imported goods for the installation of new capital goods and these goods imported for the installation of new capital goods can include assemblies, sub-assemblies, components, sub-components.
Also submitted that these assemblies, sub-assemblies, components, and sub-components had been allowed as spares in Foreign Trade Policy which defined the capital goods to include spares and it means that the spares can be imported for pre-production purposes.
Mihir Ranjan, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee had imported goods for the installation of new capital goods and these goods cannot be spared because spares are those which are acquired to replace defective spares/parts of existing/old capital goods.
The Bench observed that the FTP defined the capital goods to include spares, meaning that the spares can be imported for pre-production purposes also, and when the FTP allows such imports under the EPCG, the Customs department cannot question the same and in fact, had no authority to do so.
The two-member bench comprising R Muralidhar (Judicial) and Rajeev Tandon (Technical) held that the Customs department has no authority to question the import of assessee as spares and the differential demand was not sustainable.
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