Madras High Court Allows Concessional Customs Duty Benefit On Goods Used In Rotor Of Windmills For Notional Billing To Customer

The single bench of Justice M. Nirmal Kumar has observed that the imported rotor blades need no customization and mechanisation. Hence, raising an invoice in the name of the client after importing and transporting it to the customer's site is only a notional exercise. It cannot be said that the petitioner is not the importer and that he is the person who has used it for a specific purpose for which it was imported.

The petitioner/assessee is engaged in the manufacture, erection, installation and commissioning of Wind Operated Electricity Generators (WOEG), commonly known as Windmills. For setting up a Windmill, expertise in installation and commissioning of the Windmills at the site is required. Originally, the petitioner's Company carried on business in the name and style of ''Accoina Windpower India Private Limited'' and later, changed its name to ''Nordex India Private Limited''.

During the year 2016, Sun Photovoltaic Energy Private Limited, Bangalore, placed a turnkey contract with the petitioner. As per the contract, the petitioner was required to set up 26 windmills in the Bannur Wind Project in Karnataka. The contract involved the supply, erection, installation, and commissioning of wind turbines at the site. The Sun Photovoltaic Energy Private Limited awarded two contracts to the petitioner, one for the supply of all equipment and the second one for erection, installation and commissioning services.

The petitioner imported 78 rotor blades from China for the manufacture and installation of 26 windmills. The imported rotor blades were directly moved from the Tuticorin Port to the site in Karnataka, where they are to be installed. This is for the reason that rotor blades are huge and require specialised transportation, and it would be extremely uneconomical and unviable to transport the rotor blades to the factory of the petitioner. transport it once again to the site. Furthermore, there is a possibility of the blades getting damaged. The transportation itself can be done only after getting approval. Hence, it would not be possible for the petitioner to transport the said blades from the port to its factory and thereafter to the site. The rotor blades need no further customization in the petitioner's factory.

The Government of India, to encourage clean energy, granted exemption from customs duty and excise duty for all the parts and components required for windmills.

The petitioner submitted that they are the manufacturer of windmills and, as such, they install, erect, and commission the windmills for the customers at the respective site under an agreement and that they are eligible to avail of the exemption available.

The department issued a show cause notice to the petitioner alleging suppression of facts and demanded the differential customs duty of Rs.4,61,37,157, invoking the extended period of limitation as per Section 28(4) of the Customs Act, 1962. Penalties were proposed under Sections 112(a), 114-A, and 114-AA of the Act.

The petitioner contended that where the wording of the notification is clear and unambiguous, it has to be given effect. Exemption cannot be denied by giving a construction not justified by the wording of notification.

The respondent contended that the petitioner had not denied the execution of two parts of the contract. After completion of the first part, namely, supply of goods, the second part, i.e., erection, installation and commissioning of the windmill, will be carried on. The petitioner had not produced copies of the contract. Once the sale of goods is completed, the petitioner has no control over the same. After the sale, the buyer becomes the absolute owner of the goods. In this case, no power or right is given to the petitioner after the sale. In the absence of any material, the petitioner cannot claim exemption.

The court held that the windmill had to be erected only on the site. It cannot be assembled in a factory and, thereafter, moved to the site, which is impracticable. The imported rotor blades, thus, need no customization and mechanisation.

The court stated that the exemption cannot be denied unless it is seen that it has been made to evade duty; it leads to evasion of duty. The rotor blades have been fixed in the windmill, which is a vital component for completion of the windmill project.

Case Title: Nordex India Private Limited Versus Commissioner of Customs

Case No: Writ Petition (MD) No.8026 of 2019

Date: 17.08.2022

Citation: 2022 LiveLaw (Mad) 401

Counsel For Petitioner: Advocate Joseph Prabakar

Counsel For Respondent: Senior Standing Counsel R.Aravindan

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