CX - Notfn 6/2006 - Certificate has to be issued only post supply as condition requires certificate to effect that 'such goods are cleared for intended use' - Commissioner has misconceived that certificate is required prior to clearance: CESTAT
By TIOL News Service
MUMBAI, SEPT 23, 2014: THE appellants are manufacturing MS Pipes and undertaking the process of guniting i.e. outer coating of the MS Pipes with wiremesh and cement-sand mix in various places across India and supplying coated MS Pipes to various water supply projects. The Appellants are also availing exemption under Sl. No. 7 of the Notification No. 6/2006-CE on obtaining a certificate from District Magistrate.
Consequent to the Work Order received from Nagpur Municipal Corporation, one of the partners of the Joint Venture viz., SEW Infrastructure Ltd. placed Work Order on the Appellants for fabrication of Pipe 2300mm dia (O.D) 12 mm thickness for Nagpur City Water Augmentation Scheme. Under this work order, SEW would supply MS Plates at appellant's work site free of cost for fabrication of Pipes. The scope of work includes all the items of fabrication of Pipes including manpower and machinery, material, unloading & loading, stacking of plates edge preparation (pug gutting, grinding, finishing), rolling/bending to the required dia, tack welding, longitudinal scam and circumferential seam welding by SAW machines all required testing as per the technical specifications given by Nagpur Municipal Corporation. SEW placed another Work Order for 20mm thick guniting around 12 mm thick pipe with wire mesh of 50 x 50 x 3.15 mm or equivalent weight per SQM for Nagpur City Water Augmentation Scheme Pench-IV.
The Appellants undertook the activity of manufacture and coating of pipes as a job-worker to SEW. SEW provided the required space to the Appellants for setting up the manufacturing facility. As per the agreement, SEW supplied the principal raw material viz., MS Sheets to the Appellants. The other raw materials required for manufacture of quoted pipes viz., cement, wire mesh etc., was procured by the Appellants. The machinery required for the manufacturing activity belonged to the Appellants. The activity of fabrication of MS Pipes and guniting of MS Pipes is undertaken in the same premises.
Accordingly the Appellants manufactured and cleared 622 Nos. MS Pipes from 23.03.2009 to 12.11.2009 to the above said project without payment of duty on the bona fide belief that the pipe supplied to the above said project are exempted from payment of Excise Duty in terms of Sl. No. 7 of the Notification No.6/2006-CE dated 1.3.2006. The Appellants also obtained a certificate dated 10.06.2009 from the District Magistrate certifying that the pipes are used in water supply Scheme of the Nagpur Municipal Corporation. Thereafter the Appellants obtained another certificate dated 25.11.2009 from the District Magistrate, Nagpur wherein Appellants name was included as Manufacturer/Supplier/Job Worker.
Pursuant to the visit of the Preventive officers of CE, HQ, Nagpur, and the investigations that followed, two SCNs came to be issued proposing to deny the benefit of exemption on the ground that Appellants failed to obtain the requisite certificate from the Collector/District Magistrate/Deputy Commissioner of the District in which the plant is located and also did not produce the requisite certificate before the jurisdictional Deputy Commissioner of Central Excise to the effect that the MS pipes are to be cleared for intended use.
The CCE, Nagpur confirmed a total demand of Rs.7,10,38,280/- and imposed penalty of Rs.7,10,38,280/- apart from levying interest on the ground that the certificate required under Sl.No.7 of the Notification No.6/2006-CE dated 1.3.2006 was not obtained by the Appellants before starting of the production or at least before clearance of final products without payment of duty.
After hearing the submissions the Bench in categorical terms observed -
"…we hold that the appellant is a job-worker. We further hold that no excise duty is chargeable in the facts and circumstances of the case under the provisions of Notification No. 6/2006-CE on MS Pipes etc. cleared to Nagpur Municipal Corporation for water supply scheme, Pune-IV from its sources to the plant and from there to start point and also satisfied the other condition being pipes of outer diameter exceeding 10 cm when such pipes are integral part of the water supply project stipulated at Sr. No.1 of the Notification is satisfied. Further, the appellant satisfied the condition No. 4 of the said Notification which requires for production of a certificate issued by Collector/District Magistrate/Development Commissioner of the District in which the plant is located, is produced to the Dy. Commissioner / Addl. Commissioner of Central Excise, having the jurisdiction, to the effect that such goods are cleared for the intended use specified in column No. 3 of the table. We further hold that such certificates have to be issued only post supply made by the District authority, as the said condition requires certificate to the effect that "such goods are cleared for the intended use". Thus, we also hold that the Commissioner has misconceived the condition by observing in the impugned order that such certificate is required to be obtained prior to clearance of the concerned goods/pipes…."
The orders confirming the CE duty demand of Rs.7.10 crores & imposing equivalent penalty and interest were set aside and the appeals were allowed with consequential relief.
(See 2014-TIOL-1816-CESTAT-MUM)
