2012 (11) TMI 770 - AT - Central Excise

Coal based captive power plant - Exemption Notification No. 6/2006-C.E. at Sr. No. 91 read with Notification No. 91/2004-Cus. - ICB - denial of exemption for various reasons Held that - it is not necessary that the sub-contractor himself should take part in International Competitive Bidding in such situations to claim exemption under Notification No. 91/2004-Cus. For this we take note of the fact DGFT has given advance licence to the appellants though they have not taken part in the bidding. Further what is final goods for one manufacturer is raw material or component for another manufacturer and the materials supplied by the Appellants are material required by the company responsible for setting up the power plant. Prima facie, we are also not in agreement that they could not have availed the exemption prior to the date they were granted advance authorisation licence for import of raw material required by them. Further the argument of the appellants regarding relief under Chapter 8 of the Import Export Policy also has strong merit. - pre deposit waived.

Issues:
1. Eligibility for exemption under Notification No. 91/2004-Cus.
2. Validity of advance authorization for claiming exemption.
3. Compliance with capacity specifications in the advance license.
4. Requirement of participation in International Competitive Bidding for exemption eligibility.

Issue 1: Eligibility for exemption under Notification No. 91/2004-Cus.
The Appellants supplied goods for a power plant project under an order from a contractor who participated in International Competitive Bidding. The Revenue contended that the Appellants were not eligible for exemption under Notification No. 91/2004-Cus. as they supplied final products instead of materials for the project. However, the Appellants argued that the goods supplied were components for the main contractor's final goods, making them eligible for the exemption. The Tribunal prima facie agreed, stating that what constitutes "final goods" for one manufacturer may be raw material for another, and the supplied materials were necessary for the power plant project, thus justifying the exemption.

Issue 2: Validity of advance authorization for claiming exemption.
The Revenue argued that since the advance license was issued after the goods were supplied, the Appellants could not avail the exemption under Notification No. 91/2004-Cus. The Appellants contended that the license was obtained for procuring raw materials for manufacturing the supplied goods, and the timing of the license issuance should not affect the excise duty exemption on the components they manufactured. The Tribunal found merit in the Appellants' argument and granted waiver of pre-deposit for hearing the appeal, acknowledging that the delay in license issuance should not hinder the exemption claim.

Issue 3: Compliance with capacity specifications in the advance license.
The Revenue noted a discrepancy in the capacity of the equipment supplied by the Appellants compared to the capacity specified in the advance license. The Appellants explained that the slight increase in power rating was for safety margin purposes and did not affect the usability of the goods in the project. The Tribunal accepted this explanation, emphasizing that the goods were indeed used for the project, and the capacity difference should not disqualify the Appellants from the exemption.

Issue 4: Requirement of participation in International Competitive Bidding for exemption eligibility.
The Revenue argued that the Appellants were not eligible for the exemption as they did not participate in International Competitive Bidding. However, the Tribunal opined that participation in such bidding by the main contractor sufficed for the subcontractor to claim the exemption. The Tribunal highlighted that the Directorate General of Foreign Trade (DGFT) granted the Appellants an advance license despite their non-participation in bidding, indicating that direct involvement in bidding was not a prerequisite for exemption eligibility.

In conclusion, the Tribunal granted relief to the Appellants by waiving the pre-deposit for the appeal and staying the collection of dues during the appeal's pendency, considering the merits of their arguments regarding exemption eligibility under Notification No. 91/2004-Cus.

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