2014 (3) TMI 703 - AT - Central Excise

Reversal of CENVAT Credit - Final product supplied under international competitive bidding to mega power projects. - Exemption under Notification No. 6/2006, S. No. 91 - Held that - , there are exceptions provided under Rule 6(6) of CENVAT Credit Rules. One such exception under Rule 6(6)(vii) applies to goods supplied against international competitive bidding. In the present case, not only the circuit breakers have been supplied against international competitive bidding but also the mandatory spares . It was the Government s policy to treat supply against an international competitive bidding on par with exports and grant exemption. In the case of exports, the goods are not only supplied duty-free but also the exporter is allowed to either get a refund of the duty on the inputs or a drawback. Equity demands that the appellants who have supplied the impugned goods against international competitive bidding are not burdened with the duty on the inputs which have been supplied along with the main equipment as mandatory spares , without which they could not have fulfilled their obligation under the international competitive bidding - Decided in favour of assessee.

Summary

Issues:
1. Duty payment on 'mandatory spares' supplied along with 'circuit breakers' domestically versus internationally.
2. Reversal of credit on inputs supplied as 'mandatory spares' against international competitive bidding.
3. Applicability of CENVAT Credit Rules and exemptions for goods supplied against international competitive bidding.

Analysis:
1. The case involved a dispute regarding the duty payment on 'mandatory spares' supplied along with 'circuit breakers' by the appellants domestically and internationally. The appellants paid duty on both the 'circuit breakers' and 'mandatory spares' for domestic sales but availed exemption under Notification No. 6/2006 for international competitive bidding supplies.

2. The Department contended that the 'mandatory spares' were initially brought in as inputs, and a demand was made for credit reversal when these inputs were supplied externally. However, under the CENVAT Credit Rules, exceptions exist for goods supplied against international competitive bidding, as per Rule 6(6)(vii).

3. The Tribunal noted that the exemption under Notification No. 6/2006 applied to both 'circuit breakers' and 'mandatory spares' supplied against international competitive bidding. The Department did not dispute this exemption, as the bids and purchase orders included both items. The Tribunal emphasized that the 'mandatory spares' were essential for fulfilling obligations under international competitive bidding, akin to exports where duty exemptions are granted.

4. Recognizing the policy equivalence of supply against international competitive bidding to exports, the Tribunal held that burdening the appellants with duty on inputs supplied as 'mandatory spares' was unjust. The Tribunal set aside the impugned orders, emphasizing that the appellants should not be liable to reverse credit or pay duty on 'mandatory spares' supplied against international competitive bidding.

In conclusion, the Tribunal allowed both appeals, highlighting the equity and policy considerations in granting duty exemptions for goods supplied against international competitive bidding, including 'mandatory spares' essential for fulfilling bidding obligations.