2009 (11) TMI 370 - AT - Central Excise

Ductile Iron Pipes- Notification No. 6/2002-C.E., dated 1-3-2002-The appellants herein are manufacturers of Ductile Iron Pipes (DIP) and are clearing major quantity of this goods on payment of appropriate duty of excise in the normal course. The appellant availing the exemption under Notification on the supply of DIPs to the water supply project and water treatment plant. Held that- the pipes which are used for delivery of water from treatment plant to various storage facilities are eligible for the benefit of Notifications, is affirmed by the Hon ble Supreme Court, we find that the second issue is squarely covered in favour of the assessee/appellant.

Issues Involved:
1. Eligibility for exemption under Notifications for pipes used beyond the first storage facility.
2. Requirement of setting up a new water treatment plant for exemption.
3. Validity of certificates issued by competent authorities.
4. End-use requirement under the Notifications.
5. Applicability of Circular dated October 28, 2005.
6. Certificates issued in the name other than the appellant.
7. Allegation of use for industrial purposes.
8. Scrutiny and verification of certificates.
9. Limitation on demand.
10. Demand of interest and imposition of penalty.

Issue-wise Detailed Analysis:

1. Eligibility for exemption under Notifications for pipes used beyond the first storage facility:
The Tribunal referenced previous decisions, including *Commissioner of Central Excise, Kolkata-III v. Electrosteel Castings* and *Commissioner of Central Excise, Customs & Service Tax (Appeals-III) v. IVRCL Infrastructures & Projects*, which were affirmed by the Supreme Court. It was concluded that the exemption under the Notifications is available for pipes used beyond the first storage facility. The Tribunal stated, "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."

2. Requirement of setting up a new water treatment plant for exemption:
The Tribunal noted that the Notifications do not necessitate the setting up of a new water treatment plant for the exemption on pipes. The Notifications list two categories of goods exempted: machinery for setting up water treatment plants and pipes needed for delivery of water. The Tribunal emphasized that these categories are mutually exclusive and do not require the pipes to be connected to a new plant.

3. Validity of certificates issued by competent authorities:
The Tribunal held that the certificates issued by the prescribed authorities, such as Collectors or District Magistrates, are sufficient to meet the conditions of the Notifications. It was stated, "The Commissioner had no right, authority or jurisdiction to sit in judgment over or review the certificates issued by the competent/prescribed authority under the said Notifications."

4. End-use requirement under the Notifications:
The Tribunal clarified that the Notifications do not impose an end-use requirement. The Notifications only require that the goods are intended for use as specified, which is certified by the competent authority. The Tribunal rejected the notion that the appellant needed to prove the actual use of the pipes post-clearance.

5. Applicability of Circular dated October 28, 2005:
The Tribunal found that the Circular dated October 28, 2005, which sought to restrict the benefit of the exemption to pipes used up to the first storage facility, was contrary to law. It was held that a circular cannot add new conditions to an exemption notification or restrict its scope.

6. Certificates issued in the name other than the appellant:
The Tribunal addressed the issue of a certificate issued in the name of a contractor rather than the appellant. It was held that the benefit under the Notification could not be denied based on this technicality, especially since the Notification does not stipulate that the certificate must be in the supplier's name.

7. Allegation of use for industrial purposes:
The Tribunal noted that the exemption is allowable for goods used in water supply projects, including those for industrial purposes, under Notification No. 3/2004-C.E. This aspect was overlooked by the Commissioner.

8. Scrutiny and verification of certificates:
The Tribunal found that the scrutiny and verification of certificates by the Adjudicating Authority were flawed. The certificates issued by competent authorities were valid and met the conditions of the Notifications.

9. Limitation on demand:
The Tribunal held that the demand covered by the show cause notice dated November 22, 2007, was barred by limitation. The notice related to clearances made between February 2003 and October 2005, and was issued beyond the prescribed period of one year under Section 11A(1) of the Act.

10. Demand of interest and imposition of penalty:
The Tribunal concluded that no interest or penalty could be imposed as there was no contravention of the Act or Rules by the appellant. The imposition of penalties under Section 11AC of the Act and Rule 25 of the Central Excise Rules, 2002, was deemed illegal and unsustainable.

Conclusion:
The Tribunal set aside the impugned order, holding that the Ductile Iron Pipes (DIPs) cleared by the appellant were eligible for the benefit of the Notifications. The appeal was allowed with consequential relief.

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