Holding

The Essentiality Certificate makes the captive power plant part of the fertilizer project, entitling it to the nil rate of duty under serial 226(i) of Notification No. 11/97.

Summary

Zuari Industries Ltd, a fertilizer manufacturer, sought to import a 6 MW captive power plant as part of a substantial expansion of its NPK plant under Project Import Regulations. The Ministry of Chemicals & Fertilisers issued an Essentiality Certificate stating that the power plant was essential for the fertilizer project, and the importer claimed nil customs duty under Notification No. 11/97 (serial 226(i)). The Revenue argued that the power plant fell under serial 226(iii) and was liable to 20% duty plus additional duty. Lower authorities upheld the Revenue’s view. The Supreme Court held that the Essentiality Certificate is conclusive proof that the power plant is a capital good integral to the fertilizer project, and therefore entitled to the nil rate of duty under serial 226(i). The Court also clarified that Heading 98.01 of the Customs Tariff Act, 1975 is a specific entry to be liberally interpreted in favour of industrial projects. The appeal was allowed, setting aside the CEGAT order.

Issues considered

Whether the 6 MW captive power plant imported for the expansion of a fertilizer project qualifies for nil customs duty under Notification No. 11/97 (serial 226(i)) or is subject to duty under serial 226(iii).
Whether an Essentiality Certificate issued by the sponsoring Ministry is binding on the Revenue for granting exemption under the customs notification.
How Heading 98.01 of the Customs Tariff Act, 1975 should be interpreted – as a specific entry applicable to the whole project import.

Legislation cited

Customs Act, 1962s. 130E
Customs Tariff Act, 1975s. Heading 98.01

Subjects

customs duty exemptionessentiality certificateproject importheading 98.01fertilizer plantcaptive power plantnil rate of dutyinterpretation of customs law

Judgment

ZUARI INDUSTRIES LTD. A
v.
COMMISSIONER OF CENTRAL EXCISE & CUSTOMS

MARCH 29, 2007

[S. H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] B

-...
l' Customs Act, 1962--Customs duty-Exemption from-Entitlement-
Expansion of Fertilizer Project by assessee---Goods imported for such project
entitled to benefit of Project Import Assessment and benefit under Notification C
specifying 'nil' rate of duty in respect of goods required for fertilizer plant-
Assessee seeking 'Essentiality Certificate' in respect of 6 MW Captive Power
Plant as part of the entire capital goods for the project-Sponsoring Ministry
granting the certificate in respect of the Power Plant as well-Revenue
denying the exemption on the Power Plant-Order of Revenue upheld by the
authorities and courts belo~n appeal, held: when the sponsoring Ministry D
.... certifies that such Power Plant was essential for the project, the Revenue
cannot go behind such certificate and deny the benefit ofexemption-Customs
Exemption Notification No. 11197 dated 1.3.1997-Project Import
Regulations-Customs Tariff Act, 1975-Heading 98.01.

Customs Tariff Act, 1975-Heading 98.01-Nature and interpretation E
of the Heading-Held: The heading is a specific entry-It is neither general
nor residuary entry-It should be interpreted liberally as it deals with
industrialization-It has to be read in the context of the exemption
Notification-Customs Exemption Notification No. 11197 dated 1.3.1997.

Assessee was the manufacturer of fertilizers. It obtained registration F
of all its imports required for expansion of its fertilizer project under the
provisions of Project Import Regulations, 1986. The goods imported for such
expansion were entitled to the benefit of Project Import Assessment under
Heading 98.01 of Schedule to Customs Tariff Act, 1975 and also to the benefit
of Customs Exemption Notification No. 11/97 dated 1.3.1997. The Notification G
specified nil rate of duty in respect of "goods required for fertilizer plant".
The assessee gave its project report to the sponsoring Ministry under the
~ Regulations, seeking 'Essentiality Certificate'. It was indicated therein that
for the expansion of the fertilizer project they also needed 6 MW Captive

553 H
554 SUPREME COURT REPORTS [2007) 4 S.C.R.

A Power Plant for continuous flow cf electricity which was required for the
project. The sponsoring Ministry by the 'Essentiality Certificate'
recommended the Power Plant as part of the entire capital goods required by
the assessee for substantial exapansion of the fertilizer project. Revenue
denied the assessee the benefit of 'nil' duty in respect of the Power Plant and
B held the same liable to duty at 20% to 2% and additional duty of 13% holding
that fertilizer project and the Captive Power Plant were two distinct projects
so far as the rate of duty was concerned. All the Authorities below as well as
Customs, Excise and Gold (Control) Appellate Tribunal upheld the view of
the Revenue. Hence the present appeal.

C Allowing the appeal, the Court

HELD: 1.1. The assessee had given to the sponsoring Ministry its entire
Project Report. In that they had indicated that for the expansion of the
fertilizer project they needed an extra item of capital goods, namely, 6MW
Captive Power Plant. In their application, the assessee had made it clear that
D the fertilizer project was dependent on continuous flow of electricity, which
could be provided by such Captive Power Plant. Therefore, it was not open to
the Revenue to reject the assessee's case for nil rate of duty on the said item,
particularly when the certificate says so. Essentiality certificate must be
treated as a proof of fulfilment of the eligibility conditions by the. importer
for obtaining the benefit of the exemption notification. The essentiality
E certificate is also a proof that an item like Captive Power Plant in a given
case could be treated as capital goods for the fertilizer project. It would depend
upon the facts of each case. If a project is to be installed in an area where
there is shortage of electricity supply and if the project needs continuous
flow of electricity and if that project is approved by the sponsoring Ministry
p saying that such supply is needed them the Revenue cannot go behind such
certificate and deny the benefit of exemption from payment of duty or deny nil
rate of duty. Once an essentiality certificate was issued by the sponsoring
authority, it was mandatory for the Revenue to register the contract.
[Para 10) (564-G-H; 565-A, B, C, DJ

G Commissioner of Customs (Imports), Mumbai v. Tullow India Operations
Ltd, [2005] 13 SCC 789 and Asiatic Oxygen Ltd v. Assistant Collector of
Customs, (1992) 57 ELT 563, relied on.

1.2. It cannot be said that the sponsoring Ministry had not applied its
mind to the list appended to the essentiality certificate. All the items in the
H
ZUARI INDUSTRIES LTD.'" COMMNR. OF CENTRAL EXCISE& CUSTOMS [KAPADIA, J.] 555

list annexed to the certificate have been certified and recommended by the A
sponsoring Ministry as the entire capital goods required for the substantial
expansion of the fertilizer project. Therefore in this case, 6 MW Captive
Power Plant is one of the items out of 14 items constituting capital goods
required substantial expansion of the fertilizer project, and, therefore, it fell
under serial no. 226(i) as goods required for the fertilizer project entitled to B
the benefit of nil rate of duty. (Para 11) (565-E, F; 566-A, BJ

2. Heading 98.01 is a specific entry. It is not a general entry. It is not
a residuary entry. It needs to be liberally interpreted as it deals with
industriali7.ation. It has to be read in the context of the exemption Notification
No. 11/97. (Para 12) (566-C) C
Appraiser, Madras Customs v. Tamil Nadu Newsprint Papers Ltd, [1988]
36 ELT 272, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 465 of2002.

From the final Order No. C-1/3653/WZB/2001 dated 15.11.2001 in Appeal D
No. C/277/01-Bom passed by the Customs, Excise and Gold (Control) Appellate
Tribunal, West Regional Bench at Mumbai.

K.N. Bhatt, U.A. Rana and Abhishek Rao (for Mis. Gagrat & Co.) for
the Appellants. ·E

K. Radhakrishnan, P. Narasimhan and B. Krishna Prasad for the
Respondents.

The Judgment of the Court was delivered by

KAPADIA, J. l. This statutory appeal is filed by the assessee-Zuari F
Industries Ltd. under section 130 E of the Customs Act, 1962 directed against
Order dated 15.11.2001 passed by Customs, Excise & Gold (Control) Appellate
Tribunal ("CEGAT'') in appeal No. C/277/01-Bom denying the assessee the
benefit of exemption under Notification No. 1111997 dated 1.3.1997. The appeal
involves the issue as to the rate of duty applicable to the imports made for (J
expansion of a Fertiliser Project.

2. Assessee is the manufacturer of fertilizers at their facility at Goa. It
obtained registration of all their imports required for expansion of their fertilizer
project under the provisions of the Project Import Regulations, 1986 (for short
"the PIR"). In respect of the said expansion, the goods imported were entitled H
556 SUPREME COURT REPORTS [2007] 4 S.C.R.

A to the benefit of Project Import Assessment under Heading 98.01 of the
Schedule to the Customs Tariff Act, 1975 and correspondingly the company
was entitled to the benefit of customs exemption Notification No. I 1197 dated
1.3.1997. The said notification specified nil rate of duty in respect of"goods
required for fertilizer plant". Ministry of Chemicals and Fertilisers was the duly
constituted Sponsoring Authority under the said PIR. The said Ministry had
B issued a certificate dated 22. l 0.1997 (Essentiality Certificate) to the effect that
the import of capital goods for expansion of the fertilizer project stood examined
and the list of goods annexed to the certificate had been attested from the
essentiality angle by the Deputy Secretary to the Government of India. At this
stage, it may be noted that in. their application for issuance of essentiality
C certificate, the assessee had stated that on account of load shedding in the
concerned area, a Captive Power Plant was essential for the substantial
expansion of the fertilizer project. By the said essentiality certificate dated
22. l 0.1997, the sponsoring Ministry requested the Customs to exempt the
customs duty on import of equipments by the assessee vide Notification No.
11197. The said certificate indicated vide item nos. 14.a and 14.b, a 6 Mega
D Watt Captive Power Plant. The essentiality certificate 'recommended' the said
Captive Power Plant as part of the entire capital goods required by the
assessee-company for substantial expansion of the fertilizer project.

3. As stated above, the dispute which arises in the present case is the
E rate of duty applicable to the imports made by the assessee for the fertilizer
project. According to the Department, the goods imported under serial nos.
14.a and 14.b of annexure 'A' to the essentiality certificate did not fall under
serial no. 226(i) of the said notification no. 11197 and, therefore, the assessee
was not entitled to the benefit of nil rate of duty in respect of 6 MW Captive
Power Plant. According to the Department, items 14.a and 14.b fell under serial
F no. 226(iii) which statedthat Captive Power Plants of 5 MW or more are liable
to duty at 20% + 2% and additional duty of 13%. By the impugned order of
adjudication, the Adjudicating Authority held that 6 MW Captive Power Plant
imported under Heading 98.01 as part of the fertilizer project, in terms of the
essentiality certificate, cannot be given the benefit of nil rate of duty, which
G was available only to fertilizer projects. In other words, according to the
Department, the fertilizer project and the Captive Power Plant are two distinct
and separate projects as far as the rate of duty was concerned. This contention
of the Department has been accepted by all the authorities below. It has been
conftnned even by the CEGAT vide the impugned judgment dated 15 .11.200 l.

H 4. Heading 98.0l is a specific entry. It is not a general entry. It is not
ZUARIINDUSTRIESLID.". COMMNR.OFCENTRALEXCISE&CUSTOMS[KAPADIA,J.) 557

~-
residuary entry. It finds place in the exemption notification no. 11/97. Project A
imports fall under this entry. It is for this reason that Entry 98.01 is said to
be a specific entry.

5. We quote hereinbelow the relevant entry of the Notification No. 11/
<J7.
B
"S Chapter Description of goods Standard Addi. Condi-
No. or Duty ti on

.... heading
No. or
rate rate No.

sub-
heading c
no.
226 98.01 Goods required for 70
i) fertilizer projects; Nil Nil
ii) coal mining projects; 2()0/o Nil
iii) captive power plants 20% 13% D
of 5 MW or more;
... iv) power generation 20% Nil
projects including gas
turbine power projects
(excluding captive power E
plants set up by projects
engaged in activities other
than in power generation);
v) power transmission 20% 10%
projects of 66 KV and F
;. above;
vi) Other industrial plants 200/o 13%
or projects."

6. We also quote hereinbelow the Essentiality Certificate dated 22.10.1997
G
along with the attested copy of list of capital goods to be imported for the
expansion of the fertilizer project.
-,....

H
558 SUPREME COURT RE?ORTS [2007) 4 S.C.R.

A "No. 15027/1197-FP-III
Government of India
Ministry of Chemicals & Fertilisers
Department of Fertilisers.
Dated 22nd October, 1997
B
To

The Assistant Commissioner of Customs, Mormugao, GOA-803

Subject: Customs duty exemption for import of capital goods for
substantial expansion of existing NPK Plant by Mis Zuari
c Agro Chemicals Ltd. At Zuarinagar, Goa.
Sir,
I am directed to say that Mis Zuari Agro Chemicals Ltd. has
proposal for the Substantial Expansion of existing NPK. Plant at
D Zuarinagar, Goa. To implement the project, they require to import
capital goods. The matter has been examined in the Department. The
list of goods has been attested on essentiality angle by Shri S.
Chandra, Deputy Adviser (F), who is equivalent to the rank of Deputy
Secretary to the Government of India. The attested copy of list of
goods valued at a CIF of US $ 544359.60 +FF 4760042.80 + FM
E 12764000 (C&F Mumbai) is sent herewith.

2. You are requested to exempt the customs duty on import of
equipments being made by Mis Zuari Agro Chemicals Ltd. under
Custom Notification No. 11/97 dated 01.03.1997.
Yours faithfully,
F Sd/-
(A.K. Sinha)
Development Officer
Tel:3383829
Encl: Attested list is enclosed.
G
Copy to: Mis Zuari Agro Chemicals Ltd., 505 Surya Kiran, 19, Kasturba ·
Gandhi Marg, New Delhi-110001
Sd/-
(A.K. Sinha)
Development Officer"
H
ZUARI INDUSTRIES LTD.''- COMMNR. OFCENlRALEXCISE&CUSTOMS [KAPADIA,J.) 559
>- "LIST OF GOODS AND SPARES TO BE IMPORTED FOR EXPANSION A
OFNPKPLANT
S.No. Description Vendor Qty. Total C&F Total C&F Total C&F
Price US $ Price FF Price FM
(Finish
Marks)
I.a) Microprocessor Mis 3 5183.00
based Dot Yokogawa Nos B
Printing Electrical
Recorder with Corpn,

.... Battery
backup
2-9-32
Nakacho,
Musahino-
Shi,
Tokyo 180, c
Japan

1.b) Spares for - do - 518.30
above. Lot
2.a) Current to - do - 13 7582.00
Pneumatic nos.
Signal D
Converter (l/P
... Converted)
2.b) Spares for - do - 758.20
above Lot
3.a) Magnetic - do - 6 18026.00
Flow meter nos.
(Remote Type) E
Assembly with
Converter &
Signal cable.
3.b) Spares for - do - 1802.60
above. Lot
4.a) Vibrating Mis 4 nos. 1076250.00
Screen Chauvin
~
complete with S.A., F
;. static dust l3a 25
casting motor Rue
& other Alfred
accessories De Vigny,
BP 2426-
38034
Grenoble, G
Cedex
2, France.
4.b) Spares for - do - l Lot 107625.00
above

H
560 SUPREME COURT REPORTS [2007) 4 S.C.R.

A 5) Centi fugal Mis A.R. 136425.00
Pump with Wilfley --..<:
motor, and Sons,
flexible Inc Post
coupling Box No.
mounted on 2330,
common Denver,
frame. Coloradi
B 80201,
U.S.A.

5.a) Phosphoric - do - 2 nos.
acid
,.:
(H3P04)
supply
c pump.
5.b) Scrubber - do - 2 nos.
Effluent
Pump
5.c) Fummes - do - 2 nos.
Scrubber
Liquor
D pump

5.d) Dryer
Scrubber
- do - 2 nos. ..,
Liquor
pump
5.e) Molten - do - 2 nos.
E Urea
pump
5.f) Spares - do - Lot 13642.50
for above
6.a) Ammonia Mis Maguin I no. 2313320.00
Sparger S.A. 2, Rue'-
Pierre Semard,
F 02800
Charmes, .,,.
France
6.b) Dryer - do - 5 nos. .-1·
Knocker
6.c) Oversize - do - 2 nos.
Crusher
with Motor,
G Base frame
and Remote
Control
6.d) Scrubber - do - 1 no.
Liquor
Sprayer :<"
6.e) Spares - do - I Lot 231332.20
H for above
l

ZUARIINDUSTRIESLID.r. COMMNR.OFCEN1RALEXCISE&CUSTOMS{KAPADIA,J.) 561

A
7.a) Butyll Rubber Mis 24
Panels with Welby nos. 91718.00
Polyster S.A.,
Polyamide Z.I.
Carcass Voie
No. 5,
10, Rue
Claude
B
Chappe,
BP-53,
76302
Sotteville,
~
Les Routen
Cedex,
France c
7.b) Spares for - do - 1 Lot 9171.80
above.

8.a) Dryer pipe Mis Situb 1 no. 357000.00
Reactor S.A.,
(Dual pipe 76430 D
cross Reactor) Tancarville,
.-' St. Romain-
-~ De-Colbose,
B.P. 123,
France

8.b) Spares for - do - 1 Lot 35700.00
above

9.a) Link Chain Mis 900 40100.00
No. 6859 Jeffrey Ft.
R with Chain

.. attachments Corpo-
ration,
2307
F
~ Maden
Drive,
Morristown,
Tennessee
37813,
U.S.A
9.b) Link Chain - do - 550 58150.00 G
No. 9118 Ft.
P with
attachments
-,..... 9.c) Link Chain - do - 1225 170850.00
No. 698A Ft.
with attachment
H
562 SUPREME COURT REPORTS [2007] 4 S.C.R.

A 9.d) Sprockets - do - 8 nos. 42050.00 -<~
9.e) Spares for - do - Lot 31115.00
above.
IO.a) Ball Lift Mis 10 nos. 64294.00
check Guichon
valve International
S.A.,
Industrial
B Valves, Rue
De Choudy-
BP 401,
73104 Ax
Les Bains ~
Cedex,

c 10.b) Spares for France
- do - Lot 6429.40
above.
I I.a) Control Mis 9 nos. 199769.00
Valve Dresser
Products
Inds. Ltd.,
Division
D Masoneilan,
4, Place de
>-.
Saverne, )._
929?1 Paris
La Defense
Cedex,
France.
E
11.b) Spares for - do - I Lot 55875.00
above.

12.a) Flap Mis 2 nos. 192324.00
Valve Vraco
SA, Zacles
Gatins, ~
F
3 AV-Du
Garigiliano,
...
France,

12.b) Spares for - do - I Lot 19232.40
above.
13.a) Bulk Solid Mis l no. 16507.00
G Recycle Ramsey,
Flow Sydney
Measurement Office,
Sydney
)f"
Box RA,
Teren
Point,
H
ZUARIINDUSTRIESLID.1•. COMMNR.OFCENTRALEXCISE&CUS'IOMS[KAP/.DIA.J.~ 563
NSW- A
Australia
2229
13.b) Spares for - do - Lot 1650.00
above.
14.a) Equipment Mis Lot 11382000.00
for 6 MW Wartsila
Power Plant Diesel,
consisting One Wartsila
B
(l) Wartsila Diesel
Vasa l8V32LN, Oy., P.O.
Diesel Box 252,
Generating set Fin-65 l 00,
with auxiliary Vaasa,
equipment.
14.b) Spares for
Finland
- do - l Lot 1382000.00 c
above.

Total without the spares 494873.00 4294677.00 11382000.00
Total Spares 49486.60 465365.80 1382000.00
Total with Spares 544359.60 4760042.80 12764000.00

This is to certify that the above goods are most e.ssential for the D
substantial expansion of the NPK plant of Zuari Agro Chemicals Ltd.,
at Zuarinagar, Goa and are hence eligible for nil rate of Customs Duty
under Customs Notification No. 11/97 dated 01.03.1997.
For ZUARI AGRO CHEMICALS LTD. For ZUARI AGRO CHEMICALS LTD.
Sd/- Sell E
(Resident Director) (S.K. Chatterjee)
Vice President-Technical"

7. There is no dispute regarding other items mentioned in the list.
Regarding those items, the Department has accepted that they have been
attested by the Sponsoring Ministry. According to the Department, the only F
dispute is with regard to the Captive Power Plant. According to the Department,
Captive Power Plant needs to be segregated from the fertilizer project on the
ground that the fertilizer project can work even without the Captive Power
Plant and that the output from the fertilizer project can be produced even
without the Captive Power Plant. According to the Department, the power G
plant is a separate project by itself. According to the Department, the power
plant is not a component or an integral part of the fertilizer project. According
to the Department, 6 MW Power Plant consisted of a generating set which
operated on diesel. According to the Department, even if on the technical side
a Captive Power Plant constituted an aid to the working of the fertilizer project
H
564 SUPREME COURT REPORTS [2007) 4 S.C.R.

A still for the purposes of chargeability one has to go by the strict interpretation
of the exemption notification no. 11/97 under which the rate of duty is nil for
the fertilizer project whereas it is 20% for the power generation project.
According to the Department, since fertilizer project and power generation
project are two different and independent projects, the assessee was not
B entitled to claim nil rate of duty in respect of 6 MW Captive Power Plant.
8. On the other hand, on behalf of the assessee, the case put up before
all the authorities was that, once an Essentiality Certificate was issued by the
Sponsoring Ministry, it was not open to the Revenue to go behind that -<" •
certificate. According to the assessee, an essentiality certificate constituted
a proof of fulfilment of the eligibility conditions by the importer for obtaining
C the benefit of exemption notification. According to the assessee, project
imports fell under a specific Heading 98.01. According to the assessee, the
import of capital goods indicated in the list annexed to the essentiality
certificate showed that the sponsoring Ministry cleared the project on the
footing that, in this particular case, looking to the ground reality in the area
D in which the plant was located, in which there was paucity of electricity, 6MW
Captive Power Plant was an essentiai requirement for expansion of the fertilizer
project. According to the assessee, the essentiality certificate along with the
attested list constituted a proof of the need to expand the fertilizer project and :A""·
for that Captive Power Plant was an essential part. According to the assessee, \ -
it was not open to the Revenue to say that the Captive Power Plant was not
E an essential requirement for the expansion of the fertilizer project, once an
essentiality certificate stands issued by the sponsoring Ministry. In this
connection, reliance is placed by the assessee on the judgment of this court
in the case of Commissioner of Customs (Imports), Mumbai v. Tullow India
Operations Ltd., reported in [2005] 13 SCC 789. Reliance is also placed by the
F assessee on the judgment of the Calcutta High Court in the case of Asiatic
Oxygen Ltd. v. Assistant Collector of Customs, reported in 1992 (57) ELT 563.

9. We find merit in this civil appeal filed by the assessee for the
following reasons.

G 10. Firstly, on the facts we find that the assessee had given to the
sponsoring Ministry its entire Project Report. In that report they had indicated
that for the expansion of the fertilizer project they needed an extra item of
capital goods, namely, 6MW Captive Power Plant. In their application, the
assessee had made it clear that the fertilizer project was dependant on
continuous flow of electricity, which could be provided by such Captive
H Power Plant. Therefore, it was not open to the Revenue to reject the assessee's
ZUARIINDUSTRIESLID. v. COMMNR.OFCENTP.ALEXCISE&CUSTOMS [KAPADIA,J.] 565
"Y- case for nil rate of duty on the said item, particularly when the certificate says A
so. In the judgment of this Court in the case of Tullow India Operations Ltd.
(supra), this Court held that essentiality certificate must be treated as a proof
of fulfilment of the eligibility conditions by the importer for obtaining the
benefit of the exemption notification. We may add that, the essentiality
certificate is also a proof that an item like Captive Power Plant in a given case
could be treated as capital goods for the fertilizer project. It would depend B
upon the facts of each case. If a project is to be installed in an area where
. J.
there is shortage of electricity supply and if the project needs continuous
flow of electricity and if that project is approved by the sponsoring Ministry
saying that such supply is needed then the Revenue cannot go behind such
certificate and deny the benefit of exemption from payment of duty or deny c
nil rate of duty. To the said effect is the judgment of the Calcutta High Court
i~ the case of Asiatic Oxygen Ltd. (supra) in which it was held that the object
behind the specific Heading 98.01 in Customs Tariff Act, 1975 was to promote
industrialization and, therefore, the heading was required to be interpreted
liberally. It was further held that, once an essentiality certificate was issued
by the sponsoring authority, it was mandatory for the Revenue to register the D
. -'\ contract.
~-

11. Secondly, before us, it has been vehemently urged that although the
essentiality certificate stood issued by the sponsoring Ministry, there is non-
application of mind by that Ministry with regard to the list of items appended
to the certificate. According to the Department, the said list has not been
E
countersigned by the competent authority in the sponsoring Ministry. We do
not find any merit in the said contention. The list consists of 14 items. The
Department has accepted 13 out of 14 items as capital goods required for the
fertilizer project, therefore, it cannot be said that the sponsoring Ministry had
l>- not applied its mind to the list appended to the essentiality certificate. This F
~
point needs further clarification. The power plant in the conceptual sense or
in the technical sense is certainly different from the fertilizer plant. However,
when we come to Heading 98.01 of the Customs Tariff Act, 1975, the
assessment is for the Project. As stated above, Heading 98.01 is the specific
entry applicable in the case of the Project Imports. An item like a power plant
G
~'
could be in ~ given case an independent Plant. Generally, it is a stand-alone
equipment. However, when it becomes a part of the entire Project/System, the
same power plant can also become one of the items of capital goods. The
......,,. essentiality certificate given by the sponsoring Ministry has treated Captive
t Power Plant, in this case, as "capital goods" along with 13 other items. The
~
assessee has also treated the Captive Power Plant as one of the capital goods H
566 SUPREME COURT REPORTS [2007) 4 S.C.R.

A required for the expansion of the fertilizer project. In the above circumstances,
all the items in the list annexed to the certificate have been certified and
recommended by the sponsoring Ministry as the entire capital goods required
for the substantial expansion of the fertilizer project. Therefore, in our view,
the assessee is right in its contention that, in this case, 6 MW Captive Power
Plant is -0ne of the items out of 14 items constituting capital goods required
B for the substantial expansion of the fertilizer project, and, therefore, it fell
under serial no. 226(i) as goods required for the fertilizer project entitled to
the benefit of nil rate of duty.

12. Before concluding, we may point out that, on behalf of the
C Department, a large number of authorities were cited on interpretation of
entries in the Customs Tariff Act, 1975. It is not necessary to examine those
authorities on interpretation. Suffice it to state that, Heading 98.0 I is a specific
entry. It is not a general entry. It is not a residuary entry. It needs to be
liberally interpreted as it deals with industrialization. It has to be read in the
context of the above Notification No. 11/97.
D
13. In the case of Appraiser, Madras Customs v. Tamil Nadu Newsprint
Papers Ltd, reported in (1988) 36 EL T 272 it has been held that Heading 84.66
(now 98.01) is not a residuary heading or a general heading relating to any
class of goods. It is the specific entry introduced with a purpose and it relates
to goods imported for initial setting up of a unit or a substantial expansion
E of an existing unit. It was held that when an importer registers a contract
under the specific entry no. 84.66 (now 98.01), all the goods imported by him
under that contract will be subjected to duty only as per that entry and it will
not be open for the Revenue to pick out some of the goods imported under
that contract and impose a different rate of duty on the footing that they are
p covered by a different heading. If the conditions prescribed under Heading
84.66 are satisfied, the duty shall be imposed on the goods under the said
Heading 84.66 as if the said goods formed the composite unit. In that case
there was another Heading 84.31 which referred also to 'paper making
machinery'. The Department contended that duty was payable on the said
item under Heading 84.3 l. It was held by Madras High Court that even ifthe
G rate of duty under Heading 84.31 was different from the rate of duty under
Heading 84.66, still the rate applicable to the paper making machinery imported
for producing papers under the PIR has to fall under specific Heading 84.66
(now 98.01) and not under Heading 84 .31, even if paper making machinery
came under both the headings. This is because once an item is imported
H under Project Imports then that items will fall under the specific entry because
ZUARllNDUSTRIESLTD.1'. COMMNR.OFCENTRALEXCISE&CUSTOMS[KAPADIA.J.] 567
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that item is imported as a part of composite unit (see para 10). In our view, A
the said judgment of the Madras High Court on interpretation of Heading
98.01 is squarely applicable to the present case, particularly on the
interpretation of the entries in the Customs Tariff Act, 1975.

14. For the above reasons, we set aside the impugned judgment of the
CEGAT dated 15.11.2001 in appeal no. C/277/01-Bom and accordingly the B
assessee's appeal stands allowed with no order as to costs.

K.K.T. Appeal allowed.