By TIOL News Service

NEW DELHI, SEPT 05, 2016: THE respondent manufactured and cleared M.S. Pipes (size 200 mm diameter) to various sites of the department of PHED for drinking water in various districts of Rajasthan on the basis of certificate issued by the Collector and the District Magistrate of the other respective districts.

The Revenue took a view that the goods covered by the certificates were meant for use in water wells as Casing Pipe for the purpose of protecting wells from collapsing and, therefore, the assessee is not entitled to the benefit of Notification No. 6/2002-CE dated 1/3/2002 (Serial No. 196A).

The original authority confirmed the demand and the Commissioner (A) upheld the same.

The matter is before the CESTAT since 2007 and was heard recently.

The relevant notification entry and the condition appended thereto is as under -

Sl. No. 196A -

(1) All items of machinery, including instruments, apparatus and appliances, auxiliary equipment and their components/parts required for setting up of water treatment plants';

(2) Pipes needed for delivery of water from its source to the plant and from there to the storage facility,

Condition 47A -

"If, a certificate issued by the Collector/District Magistrate/Deputy Commissioner of the District in which the plant is located, is produced to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction, to the effect that such goods are cleared for the intended use specified in column (3) of the Table."

The appellant submitted that they have satisfied the conditions of the Notification No. 06/2002-CE dated 1/03/2002 inasmuch as they have submitted a certificate issued by the proper authority namely, Collector/District Magistrate of the District in which the project is located to the effect that such goods are cleared for the intended use;that once such a certificate is submitted and the goods are cleared, the subsequent actual use of the goods is not relevant.

The AR reiterated the stand of the department.

The Bench noted that the CBEC has issued clarification vide Circular No. 659/50/2002-CX dated 6/9/2002 wherein it is clarified that -

"Central Excise duty will also be exempt on pipes required for obtaining untreated (raw) water from its source to the plant, and for supplying the treated (potable drinking) water to the storage place from which it would be further supplied for consumption of humans or animals. The duty concession would not be available for pipes required to supply the treated water from its storage place to the place of consumption. The concessions would be subject to the certification by the Collector/District Magistrate/Deputy Commissioner of the district in which the water treatment plant is to be set up."

Thereafter the CESTAT observed -

++ The appellant has produced the certificates from the Collector and District Magistrate of the various districts certifying in the following format:

"These pipes shall be used in water supply scheme- at different places of Bikaner sanctioned by competent authority of the state Govt. for carrying water from source located at...to treatment plant for making water fit for human and animal consumption... the above pipes are meant for intended use mentioned in Notification No. 47/2002-C.E. dated 6.09.2002...".

++ It is also fairly obvious that the goods supplied by the respondent will be covered under the second part of the notification which covers pipes needed for delivery of water from its source to the plant and from there to the storage facility. The question which needs to be answered is 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.

++ We are of the view 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.

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

(See 2016-TIOL-2300-CESTAT-DEL)