2016 (7) TMI 1025 - AT - Central Excise

Claim of exemption - manufacture and clearance of M.S. Pipes (size 200 mm diameter) to various sites of the department of PHED for drinking water in various districts of Rajasthan on the basis of certificate issued by the Collector and the District Magistrate of the other respective districts. - Notification No. 6/2002-CE - The dispute arose by the Revenue taking the view that the goods covered by the certificates were meant for use in water wells as Casing Pipe to be used for the purpose of protecting wells from collapsing. Held that - The wording of the notification is to be interpreted in such a way as not to frustrate the purpose of the notification. The CBEC Circular has clarified that exemption will be available on pipes required for obtaining untreated water from its source to the plant. This clarification fairly covers the issue on hand and the benefit cannot be denied. To take a view that the benefit can be extended only to those pipes which physically carry water and deny it to those which are used as Casing pipes (which are also needed for delivery of water) would defeat very purpose of the Exemption Notification meant for giving the benefit to water treatment plants. - Benefit of exemption allowed - Decided against the revenue.

Summary

Issues:
Interpretation of Notification No. 6/2002-CE dated 1/3/2002 (Serial No. 196A) regarding exemption for pipes used in water supply schemes.

Analysis:
The dispute in this case revolves around the interpretation of Notification No. 6/2002-CE dated 1/3/2002 (Serial No. 196A) regarding the benefit of exemption for certain pipes used in water supply schemes. The respondent had manufactured and cleared M.S. Pipes to the department of PHED for drinking water in various districts of Rajasthan based on certificates issued by the Collector and District Magistrate. The Revenue contended that the pipes were used as Casing pipes for water wells and not for delivering water, thus denying the exemption. The Original Adjudicating Authority upheld this view, but the Commissioner (Appeals) allowed the benefit of the notification, stating that the pipes were indeed used for delivering water from its source to the plant.

In the appeal, the Revenue challenged the Commissioner's decision, arguing that the exemption is only applicable to pipes used for carrying water from the source to the treatment plant and storage facility. The Revenue contended that since the respondent's pipes were used as Casing pipes for water wells, the benefit of the exemption should not be extended to them.

However, the respondent cited a CBEC Circular clarifying that the exemption covers pipes needed to obtain untreated water from the source to the plant and supply treated water to the storage facility. The Circular specified that the concession does not apply to pipes supplying treated water from storage to consumption. The respondent presented certificates from the Collector and District Magistrate certifying the intended use of the pipes in accordance with the notification.

After investigating the use of the pipes, it was found that they were primarily used as Casing pipes for tube wells. Despite not physically carrying water, the pipes were deemed necessary for delivering water from its source to the plant. The Tribunal interpreted the notification to avoid frustrating its purpose and upheld the Commissioner's decision, emphasizing that denying the benefit based on the physical transportation of water would defeat the notification's objective of aiding water treatment plants.

Therefore, the Tribunal upheld the Commissioner's order, rejecting the Revenue's appeal and affirming the benefit of the exemption for the respondent's pipes used in the water supply scheme.