2016 (8) TMI 933 - AT - Central Excise

Notification No. 6/2002-CE dated 1/3/2002 - entitlement for benefit - M.S. Pipes cleared to various sites of the department of PHED for drinking water on the basis of certificate issued by the Collector and the District Magistrate of the other respective districts - whether the pipes which are admittedly used as Casing Pipes will be covered under the category needed for delivery of water from its source to the plant, even though these are not used for carrying the water itself - Held that - the wording of the notification is to be interpreted in such a way as not to frustrate the purpose of the notification. The CBEC Circular has clarified that exemption will be available on pipes required for obtaining untreated water from its source to the plant. This clarification fairly covers the issue on hand and the benefit cannot be denied. To take a view that the benefit can be extended only to those pipes which physically carry water and deny it to those which are used as Casing Pipes (which are also needed for delivery of water) would defeat very purpose of the Exemption Notification meant for giving the benefit to water treatment plants. - Decided in favour of appellant

Summary

Issues:
Interpretation of Notification No. 6/2002-CE dated 1/3/2002 for availing exemption benefits on M.S. Pipes used for water delivery.

Analysis:
The dispute in this case revolves around the interpretation of Notification No. 6/2002-CE dated 1/3/2002 (Serial No. 196A) regarding the benefit of exemption for M.S. Pipes used for water delivery. The appellant, a manufacturer, cleared pipes to the Department of PHED for drinking water based on certificates issued by the Collector and District Magistrate. However, the Revenue contended that the pipes were meant for use as Casing Pipes for protecting wells, not for water delivery, denying the exemption under the notification. The Original Adjudicating Authority and the Commissioner (Appeals) upheld this view, leading to the appeal.

The appellant argued that they met the conditions of the notification by submitting certificates from proper authorities certifying the intended use of the pipes, which, according to them, fully satisfied the requirements of the notification. They emphasized that the subsequent actual use of the goods should not affect the exemption eligibility, citing various cases in support.

The relevant part of Notification No. 6/2002-CE dated 1/3/2002, as amended, grants exemption for machinery and pipes required for water treatment plants. The condition for exemption mandates a certificate from the Collector/District Magistrate/Deputy Commissioner specifying the intended use of the goods. A CBEC circular clarified that duty exemption applies to pipes for untreated water to the plant and treated water to storage, not for consumption delivery.

The appellant provided certificates from authorities stating the pipes' use for water supply schemes, aligning with the notification's requirements. However, the Revenue found some pipes used for purposes not covered by the certificates, leading to the denial of exemption. The Tribunal noted that even though the pipes were used as Casing Pipes, they were essential for water delivery to the plant, falling within the notification's scope.

The Tribunal interpreted the notification to avoid frustrating its purpose, emphasizing that the exemption should cover pipes needed for water delivery, including those used as Casing Pipes. Referring to the CBEC Circular, the Tribunal concluded that denying the benefit based on the specific use would defeat the notification's purpose meant for aiding water treatment plants. Consequently, the impugned order was set aside, and the appeal was allowed.