For Enfinity Global

Privileged and Confidential

CASE FOR OPINION

BACKGROUND
Pursuant to an advance ruling (“AR”) dated July 6, 2022 (attached herewith for reference), Aquila Solar
Power Private Limited (“Applicant”), a private undertaking setting up a solar power plant in
Maharashtra, was allowed to import goods (equipment, raw material such as solar cells, solar modules,
solar panels, etc.) constituting 60% of the capital investment, at a concessional rate of duty @5%
(“Concessional Rate of Duty”/ “CRD”) under the first schedule to the Customs Tariff Act, 1975
(“Act”), read with Project Import Regulations, 1986 (“Regulations”).
Upon the Applicant establishing its compliance of the eligibility criteria, and adherence to the procedure
laid down in the Regulations, it was allowed to import goods at a concession. The AR also established
that private companies can avail concessional rates of duty, and the benefits extend to solar power
projects as they fall within the ambit of power plant/ transmission plant.
The AR is a marked departure from the prevalent rate of custom duty that is applicable on Solar Modules
and Solar cells vide MNRE’s Memorandum dated March 9, 2021 (“MNRE Memo”, copy attached)
which provides for imposition of 40% Basic Custom Duty (“BCD”) on Solar Modules (CTH
85414012), and 25% BCD on Solar cells ( CTH 85414011), w.e.f. April 1, 2022.
From the above mentioned AR, the following queries arise:

QUERY 1:
Whether the AR and the CRD allowed thereunder is in conflict with MNRE’s Memo and which one
will prevail?

QUERY 2:
Whether Enfinity Global (“Client”) can follow the path adopted by Aquila Solar Power Private Limited
and avail similar benefits, if yes, how?
Our responses to the above queries are as under:
Response to Query 1:
The MNRE Memo and the Regulations operate in different spheres. While the distinction and ambit is
not clearly spelled out, we can infer that the said MNRE Memo imposes BCD on import of two
components, i.e. Solar Modules and Solar Cells, whereas the Regulations provide exemption on import
of goods, which include modules, other equipment, raw material, etc., and are applicable only to power
projects, in other words, to developers. Therefore, a case can be made out that while the MNRE memo
applies to import of goods by any person, the CRD benefit can be availed of only by certain persons
who are engaged in the activity of developing power projects.
In our opinion, an office memorandum issued by MNRE cannot have an overriding effect on
Regulations passed under the Act (a regulation itself is a legislative action which supersedes any
executive action). It is important to note that the MNRE Memo itself states that the BCD is effective
from April 1, 2022, and the customs notification would be passed in due course. The reason behind this
analogy is simple – the Central Board of Indirect Taxes and Customs is the relevant authority in so far
as any and all issues relating to imposition of customs duty in the country are concerned. In addition to
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prescribing rates of custom duties on various types of goods, CBIC also prescribes exemptions under
the aegis of the Indian Customs Act, 1962 read with Custom Tariff Act, 1975 and maintains a list of
exempted goods with concessional rate of custom duty, as a means to promote exports.
It is noteworthy that the BCD has been issued by MNRE, whereas the list of exempted goods and
concessional rates of custom duty, as stated above, is maintained by CBIC. The objective behind
prescribing higher custom duty on import of solar cells and modules can be best explained as
protectionist measure aimed at promoting local manufacturing of such goods (and exports thereafter in
future). This is in stark contrast to the approach adopted by CBIC while issuing exemption notifications
which are aimed at promoting development of certain sectors and industries.
In the given scheme of things, harmonious construction of apparently conflicting provisions mandated
by different agencies/ governmental bodies is required. In our humble opinion, such interpretation
would eventually lead to the conclusion that notifications issued by CBIC, being the relevant authority
to decide on matters related to any and all custom duties and exemption thereon, shall supersede
notifications issued by any other governmental authority. For this reason, the MNRE Memo also
contemplates issuance of notification by CBIC in due course of time.
This provides a time constrained opportunity for developers to avail the benefits of the Regulations. It
cannot be predicted if concessional duty for developers would still prevail or not once a notification is
issued by Ministry of Finance, directing Customs Authority to impose BCD, as such, time is of essence.
However, since the MNRE has made BCD effective from April 1, 2022, it needs to be seen if the
notification indicated to be issued will be made effective retrospectively/co-terminus with MNRE
Memo.
Given the above circumstances, and in the absence of pronouncement on the issue from the Apex Court,
in our opinion, opportune window is available for developers to gain benefit out of the Regulations
before a notification setting aside the effect of the AR is passed.

Response to Query 2:
As per section 28J of Customs Act, 1962 an advance ruling is binding only on the applicant. Given that
the Client is involved in developing and owning solar power projects across various states, the Client
is eligible to file an application, akin to the application filed by Aquila Solar Power Private Limited,
and import equipment at concessional duty.
In order to avail CRD, the Regulations lay down an eligibility criteria and procedure that need to be
adhered to. For ease of reference, general exemptions laid down by CBIC, and the eligibility criteria
and the procedure for availing CRD benefit as laid down under the Regulations of 1986 are reproduced
in the Annexure. Kindly note that we have not delved into the merits of the above laid down eligibility
criteria, rate of concessional duty allowed, etc.
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ANNEXURE

GENERAL EXEMPTION NO. 201 ISSUED BY CBIC

Exemption to all items of machinery required for the initial setting up of a solar power generation
or facility:
[Notifn No. 1/11-Cus., dt. 6.1.2011 as amended by 14/14, 44/17]
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of
1962), and in supersession of the notification of the government of India in the Ministry of Finance (
Department of Revenue ) No. 30/2010 - Customs, dated 27th Feb. 2010, the Central Government on
being satisfied that it is necessary in the public interest so to do, hereby exempts all items of machinery,
including prime movers, instruments, apparatus and appliances, control gear and transmission
equipment and auxiliary equipment (including those required for testing and quality control) and or
solar energy production project or facility, when imported into India, from so much of the duty of
customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51
of 1975), as is in excess of 5% ad valorem, subject to the following conditions, namely:-
(1) the importer produces to the Deputy Commissioner of Customs or the Assistant Commissioner
of Customs, as the case may be, a certificate, from an officer not below the rank of a Deputy Secretary
to the Government of India in the Ministry of New and Renewable Energy to the effect that the goods
are required for initial setting up of a project or facility for the solar power generation or solar energy
production indicating the quantity, description and specification thereof; and the said officer
recommends the grant of this exemption ; and
(2) the importer furnishes an undertaking to the Deputy Commissioner of Customs or the Assistant
Commissioner of Customs, as the case may be, that such imported goods will be used for the purpose
specified and in the event of his failure to comply with this condition, he shall be liable to pay, in respect
of such goods as is not proved to have been so used, an amount equal to the difference between the duty
leviable on such goods but for the exemption under this notification and that already paid at the time of
importation.

ELIGIBILITY CRITERIA AND PROCEDURE AS PER PROJECT IMPORT

REGULATIONS, 1986

Regulation 4 - Eligibility
The assessment under the said heading No. 98.01 shall be available only to those goods which are
imported (whether in one or more than one consignment) against one or more specific contracts, which
have been registered with the appropriate Custom House in the manner specified in regulation 5 and
such contracts or contracts has or have been so registered,
i. before any order is made by the proper officer of customs permitting the clearance of the goods
for home consumption;
ii. in the case of goods cleared for home consumption without payment of duty subject to re-export
in respect of fairs, exhibitions, demonstrations, seminars, congresses and conferences, duly
sponsored or approved by the Government of India or Trade Fair Authority of India, as the case
may be, before the - Customs payment of duty.
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Regulation 5 – Registration of Contracts

1) Every importer claiming assessment of the goods falling under the said heading No. 98.01, on or
before their importation shall apply in writing to the proper officer at the port where the goods
are to be imported or where the duty is to be paid for registration of the contract or contracts, as
the case may be:

Provided that in the case of consignments sought to be cleared through a Custom House other
than the Custom House at which the contract is registered, the importer shall produce from the
Customs House of registration such information as the proper officer may require.

2) The importer shall apply, as soon as may be, after he has obtained the Import trade control licence
wherever required for the import of articles covered by the contract and in case of imports covered
by the Open General Licence or imports made by Central Government, any State Government,
statutory corporation, public body or Government undertaking run as a joint stock company
(hereinafter referred to as "Government Agency") as soon as clearance from the concerned
Administrative Ministry or Department, as the case may be, has been obtained.

3) The application shall specify -

(a) the location of the plant or project;
(b) the description of the articles to be manufactured, produced, mined or explored;
(c) the installed or designed capacity of the plant or project and in the case of substantial
expansion of an existing plant or project the installed capacity and the proposed
addition thereto;
(d) such other particulars as may be considered necessary by the proper officer for purposes
of assessment under the said heading.

4) The application shall be accompanied by the original deed of contract together with a true copy
thereof, the import trade control licence, wherever required, and an approved list of items from
the Directorate General of Technical Development or the concerned sponsoring authority.

5) The importer shall also furnish such other documents or other particulars as may be required
by the proper officer in connection with the registration of contract.

6) The proper officer shall, on being satisfied that the application in the order register the contract
by entering the particulars thereof in a book kept for the purpose, assign a number in token of
the registration and communicate that number of the importer and shall also return to the
importer all the original documents which are no longer required by him.

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