2006 (7) TMI 375 - Commissioner - Central Excise

Pipes - Exemption - Appeal to Commissioner (Appeals) - Maintainability - Interpretation of statutes - Departmental clarifications

Summary

Issues Involved:
1. Appealability of the Superintendent's order.
2. Interpretation of exemption notifications (Notification No. 6/2002 and Notification No. 6/2006).
3. Validity and binding nature of the Circulars and Trade Notices.
4. Technological requirements for water treatment and storage facilities.

Issue-wise Detailed Analysis:

1. Appealability of the Superintendent's Order:
The case involves an appeal against an order by the Superintendent of Central Excise. The appellants contended that the Superintendent's order is appealable under Section 35 of the Central Excise Act, 1944, which allows appeals against decisions or orders by Central Excise officers lower in rank than the Commissioner of Central Excise. The judgment referenced multiple cases, including *Kantilal Somechand Shah v. CCE* and *Venkatesh Patra Udyog v. CCE*, establishing that orders affecting the rights of parties are appealable. The judgment concluded that the Superintendent's order is indeed appealable.

2. Interpretation of Exemption Notifications:
The appellants argued that the pipes used for delivering water from its source to the plant and from there to the storage facility are exempt under Notification No. 6/2002 and Notification No. 6/2006. The Superintendent denied the exemption, arguing that the pipes are only exempt up to the first storage facility. The judgment analyzed the wording of the notifications and the relevant Circulars. It was established that the term "storage facility" could include multiple storage points as per Section 13(2) of the General Clauses Act, 1897, and relevant Supreme Court rulings, such as *CCE v. United Electrical Industries*. The judgment concluded that the exemption applies to all storage facilities up to the point immediately before the place of consumption.

3. Validity and Binding Nature of the Circulars and Trade Notices:
The judgment examined the contradiction between the Circular dated 6-9-2002 and the unnumbered letter dated 28-10-2005. The first Circular allowed the exemption for pipes up to the storage place from which water is further supplied for consumption, while the second letter restricted it to the first storage point. The judgment referenced the CBEC Circular No. 466/32/99-CX, which mandates that only numbered Circulars are binding. The unnumbered letter dated 28-10-2005 was not issued under Section 37B of the Central Excise Act, 1944, and thus, not binding. The judgment cited *Faridabad Iron & Steel Traders Association v. U.O.I.* and *CCE v. Tullow India Operations Ltd.*, reinforcing that the notification and the first Circular prevail over the unnumbered letter and the Trade Notice.

4. Technological Requirements for Water Treatment and Storage Facilities:
The judgment considered the technological requirements for making water fit for human consumption, noting that re-chlorination is required at various storage points. Expert opinions from Jadavpur University and the Institute of Science, Bangalore, indicated that multiple storage points are essential for maintaining water quality. The judgment concluded that the purpose of the exemption is to ensure the supply of potable water, and thus, all storage facilities up to the point of consumption should be included in the exemption.

Conclusion:
The judgment set aside the Superintendent's order, allowing the benefit of Notifications No. 47/2002 and 6/2006 to the appellants. It emphasized that the exemption applies to all storage facilities up to the last storage point before the place of consumption, ensuring the purpose of providing potable water is fulfilled. The appeal was allowed, and the benefit of the exemption notifications was extended to the appellants.