2008 (12) TMI 198 - AT - Central Excise

Supply of pipes for Drinking Water Supply Project-II by M/s. Hyderabad Metro Water Supply and Sewerage Board benefit of exemption notification no. 6/2002 dated 1.3.2002 as amended held that - in the impugned notification pipes needed for delivery of water from its source to the plant and from there to the storage facilities have been exempted subject to the requirement of obtaining a certificate from the Collector District Magistrate Deputy Commissioner of the District in which the plant is located. We find that the required certificates have been obtained by the respondents clearly showing that the impugned pipes were needed for delivery of water from the plant to the storage facilities. Secondly we find that the Notification merely talks about the storage facilities and there is no restriction that the water should be delivered only to the first storage point benefit of exemption available.

Issues Involved:
1. Entitlement of pipes to the benefit of exemption notification under Notification 6/2002-C.E. as amended by Notification No. 47/2002-C.E.
2. Interpretation of the term "storage facility" in the exemption notification.
3. Validity of the certificate issued by the District Collector.
4. Applicability of the exemption notification to pipes used beyond the first storage point.

Detailed Analysis:

1. Entitlement of Pipes to Exemption Notification:
The respondents were awarded contracts for manufacturing and supplying pipes for the Krishna Drinking Water Supply Project-II and claimed exemption from Central Excise Duty under Notification 6/2002-C.E., as amended by Notification No. 47/2002-C.E. The assessments were provisional, and the point at issue was whether the pipes were entitled to the exemption. The Original Authority confirmed the duty demand based on the restriction of the exemption to the first storage point as per Board's instruction dated 28-10-2005.

2. Interpretation of the Term "Storage Facility":
The Commissioner (Appeals) held that the term "storage facility" in the notification was not defined and should be understood to include any number of storage points from the treatment plant to the last storage point before entering the distribution mode. The Commissioner (Appeals) reasoned that restricting the exemption only to the first storage point would defeat the purpose of the exemption and that the notification did not specify such a restriction.

3. Validity of the Certificate Issued by the District Collector:
The respondents provided a certificate from the District Collector, which the Commissioner (Appeals) found to be general and not specific as required by the notification. However, the Commissioner (Appeals) concluded that despite the technical flaws, the fact that the pipes were used in a drinking water project meant the exemption could not be denied. The Revenue argued that the certificate was withdrawn and reissued with a condition for the assessee to pay the differential duty if the department decided against them.

4. Applicability of Exemption to Pipes Beyond the First Storage Point:
The Tribunal referenced a similar issue decided by the CESTAT, Kolkata in the case of CCE, Kolkata-III v. M/s. Electro Steel Castings Ltd., where it was held that the exemption notification applied to pipes required beyond the first storage point. The Tribunal found that the notification did not restrict the exemption to the first storage point and that the amended notification from 1-3-2007, which specified the first storage point, did not apply retroactively.

Conclusion:
The Tribunal agreed with the decision of the Commissioner (Appeals) and the CESTAT, Kolkata, that the exemption should not be restricted to the first storage point. The appeals by the Revenue were dismissed, affirming that the exemption under the notification applied to the pipes used for the entire water supply project, including beyond the first storage point. The operative portion of the order was pronounced in open court.

← Previous Next →