2014 (8) TMI 498 - AT - Central Excise

Mega Power projects - international competitive bidding (ICB) - Exemption under Notification No.6/2006-CE dated 01/03/06 - benefit of exemption denied in adjudication on the ground that in the projects, the requisite quantum of power has been tied up or that the projects has been awarded through tariff based competitive bidding - Held that - The goods supplied to Kawai Thermal Power Project, Sagardighi Thermal Power Project and Shree Singaji Thermal Power Project are against international competitive bidding even though in respect of these projects, the contracts were awarded through tariff based competitive biding. During the period of dispute, Sl. No. 91 of the table to the exemption Notification No. 6/2006-CE readwith condition No. 19 and Sl. No. 336 of the table to the Notification No. 12/2012-CE dated 17/03/12 readwith condition No. 41 of this notification, exempted all the goods supplied against international competition bidding from whole of the duty excise leviable thereon and the condition to which this exemption was available was that the goods if imported into India are fully exempt from Customs duty. There is no dispute that the goods, if imported into India, would be exempt from Customs duty in terms of Sl. No. 400 of the Notification No. 21/2002-CUS readwith condition No. 86, as in terms of this condition, the appellant have produced the required certificates from Joint Secretary to the Government of India. When exemption is available to the appellant in terms of two Sl. Nos. 91 as well as 91B Notification No. 6/2006-CE and 336 as well as 338 of the table to Notification No. 12/2012-CE and the appellant satisfy the conditions of the Notification No. 6/2006-CE/(Sl. No. 91) and Notification No. 12/2012-CE (Sl. No. 336), the exemption in terms of this Sl. No. cannot be denied, as exemption under this Sl. No. is available to any good supplied by a manufacturer in India against international competitive bidding. Therefore, the impugned order denying the exemption in respect of the three projects, mentioned above, is not sustainable. Even if the General Fabrication Structures, Auto welded Beams and Boxes cleared by the appellant are meant to be used as Supporting Structure for some machinery, the same would have to be treated as component parts of that machinery as the description of goods against Sl. No. 91B of Notification No. 6/2006-CE, Sl. No. 338 of Notification No. 12/2012-CE covers all components whether finished or not and raw materials for the manufacture of the items of machinery, prime movers, instruments, apparatus, appliances, control gear, transmission equipments etc. In view of this, the impugned order denying exemption to the goods supplied to Prayagraj Super Thermal Mega Power Project is also not sustainable. Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for duty exemption under Notification No. 6/2006-CE and its successor Notification No. 12/2012-CE.
2. Interpretation of exemption conditions related to international competitive bidding and tariff-based competitive bidding.
3. Classification of supplied goods as components of machinery or as structural items.

Detailed Analysis:

1. Eligibility for Duty Exemption:
The appellant, a manufacturer of boiler components for power projects, claimed duty exemption under Notification No. 6/2006-CE and its successor Notification No. 12/2012-CE for goods supplied to various power projects. The exemption was claimed under Sl. No. 91 for goods supplied against international competitive bidding and Sl. No. 91B for goods supplied to mega power projects awarded through tariff-based competitive bidding. The Commissioner rejected the exemption claims, leading to a duty demand of Rs. 1,33,50,260/- along with interest and a penalty.

2. Interpretation of Exemption Conditions:
The Commissioner argued that for projects awarded through tariff-based competitive bidding, Sl. No. 91B should apply instead of Sl. No. 91, as the latter does not require procurement against international competitive bidding. The appellant contended that the goods supplied against international competitive bidding should still qualify for exemption under Sl. No. 91, as the necessary certificates were produced, and the goods would be exempt from Customs duty if imported.

3. Classification of Supplied Goods:
For the Prayagraj Super Thermal Mega Power Project, the Commissioner held that "General Fabrication Structures, Auto welded Beams, and Boxes" did not qualify as components of machinery under the exemption notifications. The appellant argued that these items were intended for use with boilers and should be considered components of machinery.

Judgment Analysis:

Goods Supplied Against International Competitive Bidding:
The Tribunal found that the goods supplied to Kawai, Sagardighi, and Shree Singaji Thermal Power Projects were against international competitive bidding. Sl. No. 91 of Notification No. 6/2006-CE and Sl. No. 336 of Notification No. 12/2012-CE exempted all goods supplied against international competitive bidding from duty, provided they were exempt from Customs duty if imported. The Tribunal noted that the necessary certificates were produced, and the goods would be exempt from Customs duty. Thus, the exemption under Sl. No. 91 could not be denied, and the impugned order was not sustainable.

Goods Supplied to Prayagraj Super Thermal Mega Power Project:
The Tribunal observed that the project was awarded through tariff-based competitive bidding, and the appellant claimed exemption under Sl. No. 91B of Notification No. 6/2006-CE and Sl. No. 338 of Notification No. 12/2012-CE. The required certificates and undertakings were produced. The Tribunal disagreed with the Commissioner's view that the supplied goods were merely structural items, stating that even if used as supporting structures, they should be treated as components of machinery. Therefore, the exemption denial was not justified.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal, stay application, and miscellaneous application. The operative part of the order was pronounced in open court.