CESTAT Rules Stationary Engines Sold in DTA Qualify as “Similar Goods” Under FTP 2009-14, Concessional Duty Allowed [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that stationary engines cleared into the DomesticTariff Area (DTA) qualified as “similar goods” under Para 6.8 of the Foreign Trade Policy (FTP) 2009–2014, entitling the company to a concessional rate of duty under the EOU scheme.

Same Deutz-Fahr India Pvt. Ltd., the appellant, is a 100% Export Oriented Unit engaged in the manufacture of tractors, engines, and parts. The company was permitted under the FTP to sell “similar goods” in the domestic market at a concessional duty rate as per Notification No. 23/2003-CE.

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During scrutiny of returns for the period between August 2008 and March 2012, the department alleged that the appellant had sold a large number of stationary engines in DTA while exporting only a negligible quantity of such engines. It held that the stationary engines were not “similar goods” to the tractor engines exported and therefore not eligible for the concessional duty.

A show cause notice was issued demanding a differential duty of Rs. 52,98,243 along with interest and penalty. The adjudicating authority confirmed the demand and imposed penalties under Section 11AC of the Central Excise Act, 1944. Aggrieved by the order, the appellant filed an appeal before CESTAT.

The appellant's counsel argued that all engines manufactured whether for tractors or stationary use shared the same technical structure, components, and purpose. The Green Card issued to the appellant under the FTP permitted the manufacture and clearance of “engines” without specifying their end use.

They submitted that the end application of an engine does not change its essential nature and that all engines were manufactured using common machinery and processes. They also argued that the definition of “similar goods” under the Customs Valuation Rules, 1988, relied upon by the department, was not applicable to the EOU scheme governed by the FTP.

The department’s counsel argued that the engines cleared in DTA were meant for stationary applications like construction equipment and water pumps, while the exported engines were for tractors. The two types of engines were classified under different tariff headings and could not be treated as commercially interchangeable. They argued that as per Board’s Circular No. 7/2006-Cus dated 13.01.2006, the definition of “similar goods” must be based on the Customs Valuation Rules, 1988, which the appellant did not satisfy.

The two-member bench comprising M. Ajit Kumar (Technical Member) and P. Dinesha (Judicial Member) held that the term “similar goods” used in the FTP must be interpreted in the context of trade facilitation and not strictly through tax valuation rules.

The tribunal reasoned that the FTP and the Customs Act serve different purposes; definitions in one statute cannot be automatically applied to another unless expressly stated. The bench referred to the Supreme Court’s ruling in Nat Steel Equipment Pvt. Ltd., which clarified that “similar” means goods that have a general likeness and need not be identical. The tribunal also noted that the adjudicating authority had itself accepted that the core structure of the engines was the same and the differences were only in application and tuning.

The tribunal ruled that the stationary engines sold in DTA met the test of “similar goods” under Para 6.8 of FTP 2009–2014. It allowed the appeal, set aside the demand and penalty, and granted consequential relief as per law.

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