2024 (4) TMI 61 - AT - Central Excise

Exemption from Duty - Wrongful availment of N/N. 12/2012-CE dated 17.03.2012 - food preparation supplied to Women Industrial Co-Operative Societies intended for free distribution to the economically weaker sections of the society - Department denied the benefit of the exemption contained in the impugned Notification to BCPM on the ground that the Appellant Assessee did not supply the same directly for free distribution to the economically weaker sections of the society and had supplied the BCPM only to WCS for further manufacture of Complementary Weaning Food - suppression of facts - Extended period of limitation. HELD THAT - The Expert Committee introduced a new product in the name of BCPM and also the role of Private Enterprise in the manufacturing activity, to ensure supply of quality products to the beneficiaries. From the above, it is found that the scheme has been announced by the Government with the aim to supply nutritional food supplements to Children, Pregnant and Lactating women free of cost, through women cooperative societies. As the societies do not have sufficient infrastructure for processing of Ragi malt, the processing and supply of BCPM was envisaged through a Private Enterprise and the Appellant Assessee was awarded the contract for the supply of BCPM to WCS and also to ensure qualitative supply of the nutritional food supplement from WCS to the weaker sections of the society. From the above, it emerges that BCPM was never considered as a separate product. But, in the scheme formulated to supply the nutritional supplement primarily through the women cooperative Societies, BCPM being an integral part of the scheme, it has been supplied after being added with roasted wheat flour at WCS, in the name of CWF to the beneficiaries. Effectively, only one final product namely CWF has been supplied under the ICDS scheme either by the Appellant Assessee directly or through the WCS as mandated by ICDS. There is no dispute regarding the eligibility of the exemption notification to the product CWF. Since, the Department has denied the benefit of exemption provided in Notification No. 12/2012 only to the product BCPM, the discussion confined only on the availability of the said exemption to BCPM. Now, coming to the eligibility of the exemption provided under Notification No. 12/2012-CE dated 17.03.2012 to the product BCPM, it is observed that the benefit of the Notification No. 12/2012 has been extended to the product CWF, as the same has been manufactured and sold by the Appellant Assessee directly to the Anganwadis, the limb of ICDS Department. Whether the product BCPM manufactured by the Appellant Assessee and supplied to the WCS is entitled for the exemption contained in the Notification No. 12/2012? - HELD THAT - It is observed that CWF is the product intended to be supplied to the beneficiaries under the ICDS scheme. BCPM, as a separate product would not ordinarily come into existence during the course of manufacture of CWF. BCPM, as a separate product, has been introduced only by the Expert Committee suggesting the Technical Specification for BCPM. It is observed that all the essential ingredients such as Malted Ragi and vitamin premix which are instrumental to contribute amylase activity and micronutrients are contained only in BCPM. CWF has come into existence by mere addition of wheat flour in the ratio of 58 42 in the premises of WCS. The addition of roasted wheat flour with the BCPM does not transform it into a new product with new character and quality - Such certificates have been submitted to the jurisdictional Central Excise Officers, as required under condition No. 5 of Notification No. 12/2012-CE dated 17.03.2012, once in a quarter. Thus, the Appellant Assessee has proved beyond doubt that BCPM has been consumed ultimately by the beneficiaries under the ICDS scheme as mandated in the Notification No. 12/2012 dated 17.03.2012. In the impugned order, the Adjudicating Authority confirmed the demand of central excise duty on the ground that the BCPM manufactured and supplied to WCS are not intended for distribution to the beneficiaries of the ICDS scheme, as they were not supplied directly to the Anganwadis - the Commercial Tax Department has issued a clarification to the effect that BCPM is in the supply chain of the scheme and was intended for free distribution as mentioned under Clause 36(2)(v) of the Tender Document and the benefit of the Notification is applicable to BCPM. The Adjudicating Authority has relied upon the decision of the Hon ble Supreme Court in the case of Harichand Shri Gopal 2010 (11) TMI 13 - SUPREME COURT wherein it was held that in order to avail any condition-based exemption, the condition specified in the said notification has to be fulfilled. In the present case the Appellant Assessee has fulfilled all the conditions as stipulated in the Notification No. 12/2012. The Ld. Adjudicating Authority has imported the word directly into the notification and arrived at a conclusion that the benefit of the notification would be available only if the food preparations are directly supplied for the intended purpose. We observe that the Notification only envisages that BCPM, in this case, has to be supplied for the beneficiaries of the ICDS scheme - the Appellant Assessee has fulfilled the conditions of the Notification 12/2012-CE to avail the benefit of the said exemption notification. Accordingly, it is found that the above said decision relied upon by the Adjudicating Authority in the impugned order is not relevant to this case. It is an admitted fact that the Respondent Assessee paid VAT on the sale of BCPM. In view of the VAT payment, the Department took the view that BCPM is different from CWF. It is observed that when BCPM was sold to ICDS and delivered to the WCS, there was a transfer of title against the consideration and VAT was paid. This VAT payment has no relevance to the provision of service rendered to the WCS, as the definition for Service excludes the transfer of title of goods as clarified in Paragraph 2.6.4 of the Education Guide issued by CBEC. Therefore, levy of service tax is not permissible on the value of goods on which VAT has already been paid. The Lower Authority has rightly relied upon the decision of the Hon ble Supreme Court in the case of BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA 2006 (3) TMI 1 - SUPREME COURT and held that the contract entered into by the Respondent Assessee is a composite contract for the supply of BCPM and no separate invoices were raised for the service charges and hence the inbuilt price cannot be vivisected, to demand Service Tax - the decision of lower authority regarding dropping of the demand of Service Tax in the impugned order is in accordance with the law and it requires no interference as prayed for by the Department. Extended period of limitation - HELD THAT - The proforma attached to the said letter indicates that the Appellant Assessee did produce all the documents called for therein for scrutiny by the Audit party. A perusal of the list of documents submitted to the Audit party clearly reveal that the Appellant Assessee has furnished all documents to the Audit party and no abjection was raised. Further the decisions of various appellate fora quoted by the Appellant Assessee in their reply were not considered by the Adjudicating Authority. In view of the above, we observe that there was no malafide intention established on the part of the Appellant Assessee to suppress any information before the Department with an intention to evade payment of duty. Accordingly, the submission of the Appellant is agreed upon that there is no suppression of fact with an intention to evade payment of duty exists in this case - it is observed that no incriminating documents of any kind has been brought on record to substantiate the allegation of suppression. The entire demand has been raised based on the statutory documents submitted by the Appellant Assessee. Therefore, the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable and accordingly is ordered to be set aside on the ground of limitation. The demand of Central Excise duty along with interest and penalty confirmed in the impugned order is set aside. The dropping of demand of Service Tax by the Adjudicating Authority is upheld - the appeal filed by the Appellant Assessee is allowed on merits as well as on limitation.

Summary

Issues Involved:

1. Alleged wrong availment of Notification No. 12/2012-CE dated 17.03.2012 for food preparations.
2. Non-payment of Service Tax on standalone services provided to Women Industrial Co-Operative Societies (WCS).

Summary:

1. Alleged Wrong Availment of Notification No. 12/2012-CE:

The Appellant Assessee, M/s. Christy Friedgram Industries, availed exemption from Central Excise duty u/s Notification No. 12/2012-CE for products Complementary Weaning Foods (CWF) and Blend of Critical Processed Materials (BCPM). The Department denied the exemption for BCPM on the ground that it was supplied to WCS and not directly for free distribution. The Tribunal found that BCPM is an integral part of CWF, which is distributed free to beneficiaries. The certificates from the competent authority confirmed that BCPM was used in CWF distributed to economically weaker sections. The Tribunal held that the Appellant fulfilled all conditions of the Notification and was entitled to the exemption.

2. Non-payment of Service Tax:

The Department contended that the Appellant provided standalone services to WCS, which should attract Service Tax. However, the Tribunal observed that the services were part of a composite contract for the supply of BCPM, and no separate consideration was received for these services. The Tribunal upheld the Adjudicating Authority's decision to drop the Service Tax demand, relying on the decision of the Hon'ble Supreme Court in the case of BSNL and the clarification in the Education Guide issued by CBEC.

Other Findings:

The Tribunal also found that the extended period of limitation was not invocable as there was no suppression of facts by the Appellant. The demand of duty along with interest and penalty confirmed in the impugned order was set aside on merits and on the ground of limitation. The appeal filed by the Department was dismissed.

Conclusion:

The appeal filed by the Appellant Assessee was allowed, and the appeal filed by the Department was dismissed. The Tribunal held that the Appellant was entitled to the benefit of the exemption Notification No. 12/2012-CE for BCPM and that no Service Tax was payable on the alleged standalone services provided to WCS.