CESTAT Hyderabad Upholds Customs Duty Exemption For Reliance's Plant Used In Petroleum Operations

The Customs, Excise and Service Tax Appellate Tribunal, Hyderabad has upheld customs duty exemption for Reliance Industries Ltd. on its import of a Mono Ethylene Glycol Reclamation Plant used in petroleum operations.

It ruled that the benefit could not be denied merely because the plant was classified under a different tariff heading from Heading 8430, which was mentioned alongside the relevant entry in the exemption list.

The tribunal observed that a plain reading of the exemption notification left no ambiguity about the plant's eligibility. It found that Reliance was an eligible person under the exemption. The equipment was also meant for specialised services connected with petroleum operations.

“We find that in view of the admitted factual position about their admissibility in terms of being a specified person, as also, for the intended use for specialized services, there is no scope to have any doubt about its coverage within the scope of S.No.404 of the said notification.”, the tribunal ruled.

A bench of Judicial Member Angad Prasad and Technical Member A.K. Jyotishi dismissed the appeal filed by the Customs Department. The Department had challenged the order granting the exemption to Reliance.

The dispute concerned an exemption for equipment used in specialised offshore and onshore petroleum operations. The relevant entry in the exemption list mentioned Heading 8430.

Reliance's MEG Reclamation Plant, however, was classified under Heading 8419.

The Customs Department argued that this difference meant the equipment was not eligible for exemption. It also relied on a 2024 amendment that specifically introduced an entry for MEG reclamation and regeneration equipment. According to the Department, the new entry showed that the plant was not covered by the earlier general entry.

Rejecting the argument, the tribunal held that the later creation of a specific entry did not necessarily mean the equipment was excluded from an existing general entry before the amendment. It found that the MEG Reclamation Plant was covered by the general entry before the amendment. After the amendment came into force, it was covered by the specific entry.

The tribunal also relied on the Supreme Court's decision in Jain Engineering Co. It noted that an exemption cannot be denied solely because the tariff heading applicable to the goods is not mentioned when the goods themselves are covered by the relevant description. The tribunal found that principle applicable to Reliance's case.

It further took note of certification from the Directorate General of Hydrocarbons. The certification confirmed that the equipment was meant for specialised offshore and onshore petroleum operations and was necessary for natural gas production.

The tribunal found that the plant was integral to the production and processing of natural gas.

The Department had also relied on the Supreme Court's ruling in Commissioner of Customs v. Dilip Kumar & Company. Under that ruling, ambiguity in an exemption notification is generally interpreted in favour of the Revenue.

The tribunal held that this principle did not apply because it found no ambiguity in the notification.

Referring to Government of Kerala v. Mother Superior Adoration Convent, the tribunal also observed that the purpose of a beneficial exemption must be given effect. It noted that the exemption was intended to provide tax relief for equipment used in petroleum and natural gas exploration, production, and processing.

Finding that Reliance met the requirements of the exemption and that the plant was covered by the relevant entry, the tribunal found no reason to interfere with the order granting the benefit. It dismissed the Customs Department's appeal

For Appellant/Customs Department: P.R.V. Ramanan, AR (Special Counsel)

For Respondent/Reliance Industries Ltd.: Advocate J.C. Patel, Advocate