By TIOL News Service

NEW DELHI, MAY 19, 2017: ASSESSEE is manufacturing CCTV System. M/s NTPC, a GOI Enterprise, floated open tenders i.e. International Competitive Bidding (ICB) for supply of equipment required for Kahalgaon Super Thermal Project and for Sipat Super Thermal Power Project. M/s BHEL was awarded the contract and they placed purchase orders on assessee for supply of CCTV systems. Against this order, assessee supplied the goods which were cleared without payment of duty by availing exemption under Notfn 6/2006-CE.

Department has denied the said exemption on the ground that the appellant is neither a contractor who participated in International Competitive Bidding nor an approved sub-contractor for supply of the goods.

Assessee is before the CESTAT and while emphasising that there is no requirement in the exemption notification that the condition specified in the Foreign Trade Policy has to be satisfied also places reliance on the following case laws -

- Sarita Steels & Industries - 2010-TIOL-1702-CESTAT-BANG;

- CST Ltd. - 2008-TIOL-776-CESTAT-BANG

The Bench observed that-

+ Neither the benefits under Notification No. 21/2002-Cus (Sr. No. 400) nor the exemption under Notification No. 6/2006-CE (Sr. No. 91) is subject to any conditions stipulated in Foreign Trade Policy.

+ BHEL as the main contractor could have imported the impugned goods without payment of Customs duty in view of Notification No. 21/2002-Cus (Sr. No. 400). Notification No. 6/2006-CE Sr. No. 91 only makes it possible to procure such goods locally without payment of excise duty if BHEL so desires and BHEL opted for local procurement from the assessee-Appellants. So, naturally the assessee-Appellants should be eligible for exemption under Notification No. 6/2006-CE (Sr. No. 91).

+ The main point to be noticed is that relief from excise duty is not granted through the mechanism of deemed export but administered through exemption notification issued. Revenue has not made any case that any of the conditions specified in the exemption notification is not fulfilled. It is already decided by the Tribunal (supra) that exemption cannot be denied for the reason that sub-contractor did not take part in International Competitive Bidding.

The impugned order was set aside and the appeal was allowed.

In passing:

D.O.F.No.334/15/2014-TRU dated 10 July 2014 [Ref. Annex - III, CLARIFICATIONS, CENTRAL EXCISE]

4) All goods falling under any Chapter supplied against International Competitive Bidding (ICB) are fully exempt from excise duty [Sl.No.336 of notification No. 12/2012-CE dated 17.3.2012], subject to the condition: "If the goods are exempted from the duties of customs leviable under the First Schedule to Customs Tariff Act 1975 and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India". A doubt has been raised whether the excise duty exemption under this notification is available to sub-contractors who supply goods to the main contractor who has won the ICB contract. It is clarified that the said exemption is also available to sub-contractors for manufacture and supply of goods for or on behalf of the main contractor (who has won the bid for the project through ICB) for execution of the said project, subject to compliance of conditions specified, if any.

(See 2017-TIOL-1670-CESTAT-DEL)