By TIOL News Service

MUMBAI, MAR 21, 2017: THE CCE, Nashik confirmed the demand of differential duty of Rs.8,69,823/-along with interest and equivalent penalty.

The eligibility for availment of exemption 3/2004-CE, on the basis of certificates issued by District Collector, as prescribed in the said notification between April 2004 and September 2004, in relation to water supply projects for which PVC pipes and fittings were supplied by appellant, was sought to be denied on the ground that the four projects were not in conformity with the criteria contained in the said notification including the later rescinding of the certificates.

It is the contention of the appellant that pipes were supplied on the authority of valid certificates issued by the appropriate official and that they are not required to monitor the end-use. Furthermore, the certificates had been cancelled on a reference by the central excise authorities but these had been freshly issued thereafter. They also rely upon the decision in Essar Steel India Ltd - 2014-TIOL-61-SC-CX upholding the acceptance of certificate issued by competent authority.

The Bench observed that the issue for determination is whether the exemption from excise duty is linked solely and exclusively with the furnishing of the prescribed certificates or whether, as proposed by Revenue, the actual usage of the pipes clinches the eligibility for exemption.

The reliance placed by the AR on the decision in Ambit Infotech Pvt Ltd - 2014-TIOL-482-CESTAT-MAD and affirmed by the Supreme Court was distinguished on the ground that the same pertains to essentiality certificates that were cancelled whereas in the present dispute, certificates had been withdrawn upon some doubt of eligibility but were re-issued after a clarification from the Central Board of Excise & Customs.

Taking note of the decision of the Supreme Court in State of Haryana v. Dalmia Dadri Cement Ltd - 2002-TIOL-262-SC-CTpara 13 refers], the CESTAT further observed -

"8. It is quite clear that the said exemption notification is intended to benefit water supply schemes; though the exemption from duty is claimed by manufacturer, the beneficiary of exemption is the user. It is quite inconceivable that manufacturers of such supplies would be privy, as the adjudicating authority appears to do, to use of supplied materials, or is required to under the exemption notification. Such an interpretation would have the effect of denial of supplies except on payment of duty which would defeat the very purpose of the notification. In the absence of a time-frame in the notification for such use, it would accord an unwanted uncertainty to the obligation of the assessee which is not contemplated in law.

9. It is for the very reason that such projects undertaken in public interest prescribes certification by responsible public authorities. Undoubtedly, interpretation of exemption notifications cannot be left to the hands of authorities that are not created by or acknowledged in the relevant taxing statutes. However, the nature of the project to which the exemption is extended, if certified by the authority specified in the notification, cannot also be questioned by taxing authorities that are not conversant with such projects. Thus, where certificates are the qualification for exemption, it is not open to the central excise authority to overrule that certification…"

Setting aside the impugned order, the appeal was allowed.

(See 2017-TIOL-918-CESTAT-MUM)