In a recent judgment, Supreme Court has ruled that the exemption from the payment of custom duty on imported plant required for construction of roads is available only if what is imported have the essential characteristics of a plant and not merely the components of the plant.

Case Details:
M/s. IVRCL infrastructure & Projects Ltd......... …Appellant
Commissioner of Customs, Chennai............... ...Respondent
Date of Order: 15-04-2015
Coram: A. K. Sikri, J ; R. F. Nariman, J

Case Laws Referred:
Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd., (2005) 13 SCC 789
G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90
Gulam Hussain Shaikh Chougule v. S. Reynolds, Supdt. Of Customs, Marmgoa, (2002) 1 SCC 155

Facts of the Case:
The appellant entered into a Joint Venture Agreement with M/s Shapoorji Pallonji & Company Limited for the purpose of construction of roads in the State of Andhra Pradesh. The Joint Venture was awarded a contract by the National Highways Authority of India for construction of roads as a part of the Golden Quadrilateral, Phase-2 Project in Andhra Pradesh.

As per Custom Notification dated 01-03-2001, goods required for construction of roads were exempt from payment of customs duty/ additional duty subject to some conditions. Further as per list 11, Entry 1 Hot-mix Batch Plant was exempt.

The appellant placed an purchase order (PO) of a hot mix plant on M/s Lintec GmbH & Co.KG, Germany. PO was split between Lintec, Germany and M/s Marshalls, Chennai. Lintec was to supply the “critical items” required for the setting up the plant and whereas Marshalls was to supply various containers, frames, ducting, tanks etc. apart from setting up the plant after its import.

However the custom authorities took the view that the critical items as imported from Germany could not be said to be a hot mix plant and therefore, the exemption notification would not apply.

The Commissioner of Customs held that the exemption notification did not apply for two reasons. As per condition 38 of the exemption notification, imports have to be made by a Joint Venture Company and not by one of the partners of the said company. Secondly, the exemption applies to a complete plant and not to the parts or components of such plant.

CESTAT  also maintained that what had been imported was not a complete plant.

Excerpts from the Judgment:

.......the fact that an unassembled plant which is incomplete but which has the essential character of a complete plant is not the test to be applied in the present case. On the other hand, the applicable test would be what has been laid down in a catena of decisions.

.......it is clear that a hot mix plant of the type mentioned alone is exempt from payment of customs duty. Obviously, what is meant is that such plant in its entirety must be imported albeit in an unassembled form.

........ Judged by this test, it is clear that the concurrent findings of fact of the Commissioner and the CESTAT requires no interference by this Court inasmuch as both authorities have held that a complete plant in an unassembled form has not in fact been imported. Further, both authorities have relied upon statements made by none other than the Vice President of the Appellant who after retracting a statement made on 3.1.2002 has made a subsequent statement on 21.2.2002 admitting that the imported goods were only components and had not attained the essential characteristics of a plant.

In the present case, it is clear that unretracted statements made by none other than the Vice

President of the appellant company, representatives of Marshalls, and a representative of National Highways Authority of India, having never been retracted later, were made voluntarily. Reliance on the said statements, therefore, by the authorities below cannot be said to be unwarranted in law.

what has been imported is “the basic character” of the hot mix plant and not a complete plant as it is clear that what is manufactured indigenously would alone ultimately complete the plant.

Equally the letter dated 20.1.2002 being a letter by the National Highways Authority of India does not take us much further. In fact, as has been pointed out above Shri M.V.N. Rao of the said authority candidly admitted that a complete plant had not been imported and that the imported components did not have the essential characteristics of the hot mix plant in question. In the present case, both the oral evidence and the documentary evidence ultimately lead to the same conclusion: namely, that what was imported was not a hot mix plant that was complete in itself.

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