2016 (4) TMI 935 - HC - Central Excise

Whether the supply through a contractor to a project that comes within the purview of the Notification, could be construed as a supply - Goods cleared without payment of appropriate Central Excise Duty, in view of the exemption contained in Notification No.108/95 CE, dated 28.8.1995 - Held that - the object of the Notification was to exempt all goods falling under the first Schedule to the Central Excise Tariff Act, 1985, when they are supplied to the United Nations or an International Organization for their official use or supplied to the projects financed by the United Nations or an International Organization and approved by the Government of India. It is sufficient to extract the first portion of the Notification to appreciate this point. In other words, the supply made to the Organization indicated in the Notification for their official use as well as supply made to the projects financed by them, are both included within the purview of the Notification. It may be open, to the Department to contend, in some cases where the supply is made for the official use of International Organization that such supply should have been made directly. We are not saying this as an interpretation to the Notification, but indicating that at least if a case falls within the first limb, there is some possibility for the Department to take such a contention. When a case falls under the second limb namely supply to the projects financed by the United Nations or an International Organization, we do not know how an interpretation is sought to be given by the Department that such supply should have been made directly to the projects. The project in this case was undertaken by the Government of West Bengal. It was financed by the International Development Association and the same was approved by the Government of India. Therefore, it is completely illogical to think even in cases covered by the second limb, that the supply should have been made directly. Therefore, the first question of law is answered against the Appellant/Revenue. Whether the assessee could have produced certificates of exemption after clearance - Held that - the Original Authority held this question in favour of the assessee. The Commissioner reversed the decision of the Original Authority not on this ground. Therefore, the finding of the Original Authority in this regard has attained finality. - Decided against the revenue

Summary

Issues:
1. Correctness of exemption granted when goods were not directly supplied to the project or the International Organization funding the project.
2. Validity of producing exemption certificates after clearance of goods contrary to notification conditions.

Issue 1: Correctness of exemption granted:
The case involved the Revenue challenging an order passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai, regarding the correctness of granting exemption under Notification No.108/95 CE to a respondent who cleared personal computers for a project without paying Central Excise Duty. The Additional Commissioner issued a show cause notice alleging various reasons, including the goods not being supplied directly to the project, certificates being produced post-clearance, and other technicalities. The Additional Commissioner dropped proceedings based on findings related to project funding and approval, which were later reviewed. The Commissioner (Appeals) allowed the appeal solely on the ground of goods not being directly delivered to the Project Authorities. The Tribunal, relying on its previous decisions, allowed the appeal. The High Court analyzed the Notification's language and intent, emphasizing that the supply to projects financed by International Organizations need not be direct. The Court dismissed the appeal, citing the Notification's clear provisions and rejecting the Revenue's argument for direct supply.

Issue 2: Validity of producing certificates post-clearance:
The second issue revolved around whether the assessee could produce exemption certificates after clearing the goods. The Original Authority had ruled in favor of the assessee on this matter, a decision upheld by the Commissioner. The High Court referred to a Supreme Court ruling allowing post-facto production of certificates, thereby affirming the Original Authority's decision. Consequently, the second question of law was also decided against the Revenue. The appeal was ultimately dismissed, with no costs awarded.

In summary, the High Court upheld the Tribunal's decision, emphasizing the Notification's provisions and rejecting the Revenue's contentions regarding direct supply requirements and post-clearance certificate production. The judgment clarified the interpretation of the Notification's language and supported the assessee's position on both issues raised in the appeal.