Custom, Excise & Service Tax Tribunal
Samruddhi Industries vs Commissioner Of Central Excise, Nagpur on 7 July, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal Nos. E/275, 276, 277 & 273/09 (Arising out of Order-in-Original No. 21/2008/C dated 29.12.2008 passed by Commissioner, Central Excise, Nagpur.) For approval and signature: Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Samruddhi Industries Nagarjuna Construction Co Ltd Maharashtra Airport Development Co Ltd Pawan Vithaldas Tapadiya Appellant (Represented by: Mr. G. Natarajan, Advocate) Vs Commissioner of Central Excise, Nagpur Respondent (Represented by: Mr. P.N. Das, SDR ) CORAM:
Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) Date of Hearing : 07.07.2011 Date of Decision: 07.07.2011 ORDER NO..
Per: P.R. Chandrasekharan
1. These appeals are directed against the Order-in-Original No. 21/2008 dated 29.12.2008 passed by the Commissioner of Central Excise, Nagpur.
2. Brief facts of the case are as follows.
2.1 The main appellant M/s Samrudhi Industries are manufacturers of MS Pipes and supplied these pipes on behalf of M/s Nagarjuna Construction Corporation Ltd, Hyderabad and these pipes were utilized for supplying drinking water in MIHAN area at Nagpur. These pipes were laid for carrying raw water from the source at Wadgaon reservoir to the Treatment Plant at MIHAN area. These pipes were cleared without payment of Central Excise duty in terms of Notification No. 6/2000-CE dated 1.3.2006. The appellant had also obtained a certificate for the above supply from the District Collector, Nagpur District as stipulated in the said Notification. In terms of the agreement entered into between the Government of Maharashtra and the M/s Maharashtra Airport Development Company Ltd (MADC), (the nodal agency for infrastructure development of MIHAN area) the water from the Wadgaon reservoir was to be used for two purposes, one for domestic use and the other for industrial use. Of the total sanctioned quota of 26.16 million cubic meter of water, 19.44 million cubic meter of water was to be used for domestic purposes and the balance 6.72 million cubic meter of water was to be used for industrial purposes (other than as raw material).
2.2 Notification No. 6/2006-CE dated 1.3.2006 granted exemption to pipes needed for delivery of water from its source to the plant (including the clear treated water of reservoir, if any, there are) and from there to the storage facility. The Explanation to the relevant entry in the Notification further read as follows:
For the purpose of this exemption, water treatment plant includes a plant for desalination, demineralization or purification of water or for carrying out any similar process or processes intended to make the water fit for human or animal consumption, but does not include a plant supplying water for industrial purposes. 2.3 The department conducted the investigation in the matter and as part of the investigation, they recorded the statement of the Chief Engineer, M/s Maharashtra Airport Development Company Ltd, Nagpur. In his statement, the Chief Engineer admitted that the end use of water being carried in the pipeline from Wadgaon reservoir to MIHAN Treatment Plant will be for domestic as well as for non-domestic use. The domestic use of the said water in MIHAN area will be for human and household consumption and the non-domestic use will be for gardening, flushing of toilet, industrial use for industries being set up in the MIHAN area. In view of the above statement read with the allocation of quota of water for the specified purposes in terms of the agreement entered into by the Government of Maharashtra, the department was of the view that the benefit of exemption under Notification No. 6/2006-CE will not be available inasmuch as water has been supplied not only for the purpose of human or animal consumption but also for industrial purposes. Accordingly, a Show Cause Notice dated 28.5.2002 was issued demanding Central Excise duty of Rs 5,44,70,146/- under Section 11A (1) of the Central Excise Act, 1944, interest thereon under Section 11AB of the said Act and also proposing to impose penalty under Section 11AC of the said Act in respect of the clearances of pipes made for the period from April, 2007 to March 2008.
2.4 The Show Cause Notice was adjudicated by the learned Commissioner of Central Excise, Nagpur, who vide the impugned order, confirmed the duty demand alongwith interest thereon and also imposed an equivalent amount of penalty on the main appellant. A penalty of Rs 1,00,000/- each was imposed on M/s Nagarjuna Construction Company Ltd, the main contractor and also on M/s Maharashtra Airport Development Co Ltd, the nodal agency for the project under the provisions of Rule 26 of the Central Excise Rules, 2002. Further, a penalty of Rs 5,00,000/- was imposed on Mr. Pawan Vithaldas Tapadiya, partner of the appellant company under the provisions of Rule 25 of the Central Excise Rules, 2002. It is against this order the appellants are before us. All the appellants except M/s MADC are present and M/s MADC has sought adjournment. However, as the issue involved is common, we take up all the appeals together for disposal.
3 The learned counsel for the appellant submits that vide Notification No. 6/2002 dated 1.3.2002, pipes supplied for drinking water projects for animal or human consumption was granted duty exemption and the said Notification specifically excluded pipes meant for water supply for industrial purposes. Subsequently, in 2004 the Government issued another Exemption Notification No. 3/2004-CE dated 8.1.2004 which provided exemption to pipes needed for delivery of water for agricultural or industrial use. In the said Notification also, to claim the exemption, a certificate from the District Collector was required certifying that the pipes are intended for use for supply of water for agricultural or industrial use. The said Notification No. 3/2004 is also in existence. Notification No. 6/2006-CE which succeeded Notification No. 6/2002 provides exemption to pipes intended for use in water supply projects meant for animal or human consumption whereas Notification No. 3/2004 provides duty exemption to pipes intended for use for supply of water for agricultural or industrial use. Thus pipes meant for supply of water, both for industrial purposes as well as for non industrial purposes are eligible for exemption subject to production of a certificate from the District Collector. In their case, it is not in dispute that the pipes which have been supplied for the MIHAN project is mainly used for water supply for animal or human consumption. Almost 75% of the water supply is for domestic use and only the balance of about 25% of water supply is used for industrial purposes other than by way of raw materials. In as much as bulk of the water supply is for animal or human consumption, they have obtained the certificate from the District Collector claiming benefit under Notification No. 6/2006-CE dated 1.3.2006. The Notification does not speak of the end use of the water. It only specifies that the pipes should be supplied for the water supply project for an intended use. The Notification also does not say that the pipes should be exclusively used for the supply of water for animal or human consumption. In other words, if part of the water is supplied for industrial purposes, that cannot be a ground for denying the exemption on the pipes which have been mainly used for supply of water for animal or human consumption. In any case, duty exemption is available on pipes which are used for supply of water both for industrial as well as for non industrial purposes although under two different notifications.
3.1 The learned counsel for the appellant relies on the judgment of this Tribunal in the case of CC vs Shefali Arts reported in 1999 (114) ELT 928. The said case dealt with Notification No. 159/86-Cus which provided duty exemption on machines used in the processing and manufacturing of gems and jewellery for the purpose of exports. A substantial part of the production was exported but a part of the product was also sold in the local market. The department sought to deny the exemption of the benefit under Notification No. 159/86-Cus on the ground that part of the product was sold in the domestic market. This Tribunal in that case held as follows:
The notification requires that the machines should be used in the processing and manufacturing of gems and jewellery for the purpose of exports. If it were the intention to limit exemption to those machines which were to be used exclusively for production of goods for export that would have been made clear and qualifying the terms used for the purpose of export by the words solely or exclusively. In the absence of such words used in the notification, the Tribunal allowed the exemption.
3.2 The learned counsel also relies on the judgment of the Tribunal in the case of Indian Charge Chrome Ltd vs CC 2001 (138) ELT 609. In that case duty exemption was provided on captive power plant for generation of power to be used to export goods vide Notification No. 13/81-Cus dated 9.2.1981. Excess power generated was diverted to the domestic tariff area but bulk of the power was used for manufacture of export goods. The department sought to deny the benefit of exemption on the ground that part of the power was used in the domestic tariff area and not for export of goods and hence the benefit will not be available. The Tribunal in that case held in the absence of any restriction of the clause in the Notification that the imported goods will be solely or exclusively used for purpose of manufacture of goods for export, the benefit of notification would be available, so long as the power is predominantly used in the manufacture of goods for export. The said order of the Tribunal was appealed against in the apex court and the Honble apex court in Commissioner vs Indian Charge Chrome Ltd reported in 2003 (157) ELT A 137 (SC) dismissed the departments appeal on merits.
3.3 Similarly, in the case of Union of India vs TISCO 1977 (1) ELT J 61 (SC) the Honble apex court held that set off of duty on proportionate basis is not deniable if duty paid materials are used in admixture with other materials unless the exemption notification specifically requires use of duty paid materials only or exclusively or entirely. The Honble apex court was interpreting Notification No. 75/62-CE dated 24.4.62 wherein exemption was provided on steel ingots produced out of scrap obtained from duty paid pig iron. The department sought to deny the exemption on the ground that duty paid pig iron was mixed with other non duty paid material. The departments contention was negatived by the Honble apex court.
3.4 Again this Tribunal in Karl Storz Endoscopy India (P) Ltd vs CC 2000 (123) ELT 1071 held a similar view in the context of interpreting Notification No. 23/98-Cus of 2.6.98.
3.5 Applying the ratio of the above judgments to the facts of the present case, the learned counsel argues that even if part of the water is supplied for industrial purposes so long as bulk of the water is supplied for consumption by animals or human beings, benefit of exemption under Notification No. 6/2006-CE dated 1.3.2006 cannot be denied on the pipes supplied for such water supply projects.
4 The learned JCDR appearing for the department submits that Notification No. 6/2006 in the Explanation given therein, specifically excludes pipes supplied to a plant supplying water for industrial purposes. The appellant has produced a certificate from the District Collector claiming the benefit under Notification No. 6/2006-CE dated 1.3.2006. If the appellant wanted to supply pipes for projects involving water supply for industrial purposes they could have claimed the benefit under Notification No. 3/2004-CE which they did not do. He submits that the exemption under Notifications No. 6/2006 and No. 3/2004 are mutually exclusive and therefore, if the pipes have been used for projects which supply water for both industrial and non industrial purposes, the benefit of notification cannot be granted.
5 We have carefully considered the rival submissions.
5.1 There is no dispute that excise duty exemption is available for pipes needed for projects supplying water for animal or human consumption under Notification No. 6/2006-CE dated 1.3.2006 and pipes supplied to water projects used for agricultural or industrial use under exemption Notification No. 3/2004. Both the notifications stipulate the condition that a certificate from the same District Collector should be obtained for availing the exemption. The question is when the pipes are used for projects which supply water for both industrial and non industrial purposes, whether the exemption would be available or not.Notification No. 6/2006-CE grants exemption to pipes needed for delivery of water from its source to the plant and from their to the storage area. The Explanation thereof states that the plant does not include a plant for supplying water for industrial purposes. In the instant case water has been supplied for domestic use to the extent of 19.44 million cubic meter and for non domestic use (other than as raw material for industrial use) to the extent of 6.72 million cubic meter. The notification does not stipulate that pipes should be supplied to projects which supplies water exclusively for human or animal consumption. Therefore, so long as these pipes are used for water supply projects wherein bulk of the water has been supplied for human or animal consumption, applying the ratio of the judgments cited supra and relied on by the learned counsel for the appellant, the benefit of Notification No. 06/2006-CE has to be granted and cannot be denied. It has also to be borne in mind that exemption was available for pipes used for both types of projects. Therefore, non-mentioning of Notification No. 3/2004-CE in the said certificate obtained from the District Collector can at best be described as a minor technical infraction and for such minor technical discrepancy in the said certificate, the substantive benefit granted under an exemption notification should not be denied. In the instant case, there is no doubt that the pipes were used for the water supply project which was supplying bulk of the water for domestic use and even when it was used in the industry, it was used for gardening and flushing of toilets which again are not in the nature of industrial use of water. It is also on record that even when it was used for industrial purpose, it was used for purposes other than as raw material.
6 In this view of the matter, we are of the considered view that benefit of Notification No. 6/2006-CE dated 1.3.2006 is available to the appellant assessee in the facts and circumstances of the case and accordingly we set aside the demand for duty and interest thereon confirmed in impugned order. Consequently the penalties imposed are also set aside. Thus the appeals are allowed.
(Operative part pronounced in Court.) (P.G. Chacko) Member (Judicial) (P.R. Chandrasekharan) ran) Member (Technical) ical) rk 11