Redeployment of Auxiliary Equipment After Project Completion Not a Violation, Circulars Cannot Override Project Import Regulations Act: CESTAT [Read Order]

In a recent ruling, the Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that redeployment of auxiliary equipment after completion of a project does not violate the conditions of the Project Import Regulations, 1986, and clarified that circulars cannot override statutory provisions.

The case arose from appeals filed by Vishesh Kumar Walia and others against the order passed by the Commissioner of Customs (Import), Mumbai, demanding customs duty, interest, and imposing penalties under the Customs Act, 1962.

The department alleged that the appellants had breached the conditions of exemption by transferring five piling rigs imported under the Project Import Scheme to another project after completion of the Indira Gandhi Super Thermal Power Project at Jhajjar.

The appellants’ counsel argued that the rigs were auxiliary equipment imported and used for the intended project, and their redeployment after project completion did not amount to a violation of any condition under the Project Import Regulations, 1986.

The counsel further argued that once the provisional assessment had been finalized, no duty could be demanded under Section 28 of the Customs Act. They relied on the Supreme Court’s judgment in Toyo Engineering India Ltd. and other tribunal rulings which recognized that auxiliary equipment could be relocated after fulfilling its purpose in the original project.

The revenue counsel contended that the benefit of exemption under Notification No. 21/2002-Cus was project-specific and the subsequent redeployment of equipment amounted to a breach of exemption conditions. The department also referred to a Board circular to support its interpretation.

The two-member bench comprising C.J. Mathew (Technical Member) and Ajay Sharma (Judicial Member) observed that Heading 9801 of the Customs Tariff and the Project Import Regulations, 1986, do not contain any restriction on the redeployment of auxiliary equipment after completion of the project.

The tribunal pointed out that circulars cannot curtail or override the scope of statutory regulations and that the goods had been used for the intended purpose for which the exemption was granted.

The tribunal explained that once the provisional assessment is finalized and the imported goods are utilized for the approved project, there is no legal basis for demanding duty later under Section 28 of the Act. The tribunal set aside the demand of customs duty and interest, along with confiscation and penalties, and allowed the appeals filed by the appellants.

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