Custom, Excise & Service Tax Tribunal
M/S. Schwing Stetter (I) Pvt. Ltd vs Cce & St, Ltu, Chennai on 11 January, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/40732 40734/2013
(Arising out of Order-in-Appeal No. 79 81/2012 dated 30.11.2012, passed by the Commissioner of Central Excise (Appeals), LTU, Chennai).
M/s. Schwing Stetter (I) Pvt. Ltd. Appellant
Vs.
CCE & ST, LTU, Chennai Respondent
Appearance Shri Raghavan Ramabadran, Advocate, for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent CORAM :
Honble Ms. Sulekha Beevi, Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing/Decision: 10.01.2018 FINAL ORDER No. 40094-40096/2018 Per Bench The appellants are engaged in the manufacture of concrete mixer, pumps and concrete batching plant. They made supplies to projects financed by the World Bank, Asian Development Bank or International Organization approved by the Government of India, availing exemption from excise duty under Notification No. 108/1995-CE dated 28.08.1995. SCNs were issued alleging that the benefit of notification was not available to the appellants on the following grounds:-
a) The specified goods were cleared to the contractors of the project instead of the Project Authorities.
b) The exemption would be applicable only for such goods which become part of the project on permanent basis and not for those which are used by the contractors for execution of the project, who after completion of the project will remain to be owners of the said goods and would put the said goods for further deployment in other projects.
After adjudication, the original authority confirmed the demand, interest and also imposed penalties. In appeal, the Commissioner (Appeals) upheld the same. Hence these appeals.
2.1 On behalf of the appellants, Ld. Counsel Shri Raghavan Ramabhadran, submitted that the issue whether benefit of exemption is available when the goods are supplied to the contractor in charge of execution of the project financed by the World Bank stands settled in favour of the appellants in the following decisions:-
i) IBM India Pvt. Ltd. Vs. CCE -2008 (223) ELT 429 (Tri.-Chen.) affirmed by the Honble Madras High Court in CCE Vs. CESTAT 2016 (335) ELT 211 (Mad.).
ii) Caterpillar India Pvt. Ltd.-2005 (185) ELT 430 (Tri.-Delhi) affirmed by the Honble Madras High Court in CCE Vs. Caterpillar India Pvt. Ltd. - 2013 (297) ELT 8 (Mad.) and subsequently by the Honble Supreme Court in Commissioner Vs. Caterpillar India Pvt. Ltd. 2016 (335) ELT A27 (S.C).
iii) Alstom T & D (India) Ltd. Vs. CCE 2016 (335) ELT 110 (Tri.-Chen.)
iv) Sunbeam Generators Pvt. LTd. Vs. CCE 2015-TIOL-1146-CESTAT-MAD
v) M/s. Escorts Construction Equipment Ltd. Vs. CCE 2017 (10) TMI 652-CESTAT Chandigarh
vi) M/s. JCB India Ltd. Vs. CCE 2017 (6) TMI-CESTAT Chandigarh
vii) M/s. Escorts Construction Equipment Ltd. (ECEL Vs. CCE) 2017 (1) TMI 1352 CESTAT Chandigarh.
2.2 The second ground is that as per Explanation 2 inserted w.e.f. 01.03.2008, in the Notification No. 108/1995, when the goods are withdrawn from the project site during the pendency of the project, the assessee would not be eligible for exemption. The department alleges that the impugned goods viz., concrete mixers have been withdrawn by appellant after completion of the project and thus not eligible for exemption. He submitted that Explanation 2 in the said notification seeks to deny the exemption benefit only when the goods are withdrawn during the tenure of the project and not otherwise. The department has interpreted this Explanation to extend the work withdrawl even after completion of the project. This interpretation is highly erroneous. The department has incorrectly interpreted the word withdraw to refer to the time period even after completion of the project. In this regard, he placed reliance on the Explanatory Notes to the Budget changes 2008-09. As per Sl.No. 3 under miscellaneous Changes it is stated that the Explanation has been inserted in the Notification, to reflect the intention that the benefit of the exemption is not available for goods supplied to a project for temporary use. It is clear that the Explanation seeks to deny the benefit to goods which are withdrawn during the currency of the project. The goods supplied by the appellant to the contractors are used in the approved projects for the total duration of the project. The department does not allege that the goods were withdrawn at any point of time during the currency of the project. The goods have been withdrawn after execution of the project since they are not used in the said project any more. In addition, the LD. Counsel submitted that the Central Excise department has dropped the proceedings initiated vide 14 SCNs issued for the subsequent period in appellants own case. The department has accepted this order and no appeals have been filed. The CCE, LTU, Chennai vide OIO No. LTUC/568 568/2016 dated 30.09.2016, in identical set of facts, in appellants own case held that the appellants are eligible for exemption under Notification No. 108/1995. The Ld. Counsel argued that the exemption Notification is available for capital goods which are not completely consumed in the approved projects. The stand of department that the exemption is available only to those goods which are consumed in the project or become part of the project on a permanent basis is incorrect. The authorities below have denied the exemption by incorrectly interpreting the above said Explanation 2 inserted in Notification No. 13/2008 dated 01.03.2008. He pleaded that the appeal may be allowed.
3. The Ld. AR, B. Balamurugan supported the findings in the impugned order. He adverted to Explanation 2 of the Notification and submitted that the benefit of the Notification is available only when the goods brought into the project are not withdrawn by the supplier or contractor. The exemption would be applicable only for such goods which become part of the project on permanent basis (eg: cement and steel etc.) and not for those which are used by the contractors for execution of the project who after completion of the project will become the owners of the said goods and would put the said goods for further deployment in other project. That in the present case, the appellant has withdrawn the capital goods after completion of the project and therefore the exemption has been rightly denied by the authorities below. To support his contention he relied upon the decision in the case of Bird Machines Vs. CCE, Delhi 2011 (263) ELT 82 (Tri.-Del.), that in the said case, the Division Bench of the Tribunal has held that withdrawal of machines even after completion of the project would disqualify for the exemption under the said notification.
4. Heard both sides.
5. The first issue is whether the denial of exemption on the ground that the impugned goods are supplied to the contractor of the project instead of the Project Authorities is correct or not. This issue was considered by the jurisdictional High Court in the case of CCE, Pondicherry Vs. Caterpillar India Pvt. Ltd. (supra). The respondent in the said case was a manufacturer of variety of earth moving equipments and these products were cleared under the Notification No. 108/1995 dated 28.08.1995 to the contractors executing Golden Quadrilateral Road Project financed by the United Nations and International Organization claiming exemption from duty. The Honble High Court held that the use of the phrase supply to the projects financed by United nations or International Organization and approved by the Government of India clearly shows that the condition for grant of exemption is supply of the goods towards the project. That since the conditions are satisfied, the benefit of exempton cannot be denied stating that the goods were supplied to the contractor. The Honble Apex Court has affirmed the said decision. Similar view was taken by the jurisdictional High Court and Tribunal in the decisions relied by the appellants and cited supra. Following the same, we are of the view that the denial of exemption benefit on the ground that the goods were cleared to contractors cannot sustain.
6. The second issue is with regard to the denial of exemption on the basis of Explanation 2 inserted in Notification 108/1995-CE w.e.f. 01.03.2008. For better appreciation the Explanation 2 is reproduced as under:-
Explanation 2:- For the removal of doubts, it is hereby clarified that the benefit under this notification, in the case of goods supplied to the projects financed by the United Nations or an international organization, is available when the goods brought into the project are not withdrawn by the supplier or contractor and the expression goods are required for the execution of the project shall be construed accordingly.
7. The argument of the Ld. AR is that the exemption would be eligible only to those goods such as cement, steel which become permanently part of the project. That since the capital goods are withdrawn after completion of the project, these goods are not eligible for exemption. He has strongly relied upon the decision of the Tribunal in the case of Bird Machines Vs. CCE, Delhi 2011 (263) ELT 82 (Tri.-Del.). The relevant portion of the said decision Bird Machines case is reproduced as under:-
39.?It is contended that the Explanation II being clarificatory nature, it supports the case of the appellants. The Explanation prohibits withdrawal of the goods from the project by the supplier or the contractor. The same according to the Advocate for the appellants discloses that the ownership of the goods is immaterial and can vest in any supplier or contractor. First of all one has to understand that we are trying to interpret an explanation to a notification. It is settled law that the explanation cannot be construed beyond the scope of what is provided under the main provision itself. Explanation is added to any statutory provision to avoid any ambiguity arising out of the main statutory provision. The explanation cannot have existence independent of the main statutory provision. Being so, based on explanation itself, one is not entitled to enlarge the scope of the main notification more so, when the explanation is added to clarify what is stated in the main part of the notification. We find the clarification is in consonance with what we have expressed hereinabove. The explanation in question merely makes the position more explicit as discussed above. The bar prescribed against the withdrawal is at a stage after clearance of the goods for the project and on arrival of the goods at the project site. Prohibition of withdrawal is from the project site. But arrival of goods at the site by availing benefit under the notification has to be on supply of such goods to the project for the use at the project site, from where such goods cannot be withdrawn by the contractor even after completion of the project work. In other words, he cannot claim any ownership right over such goods.
8. In the Bird Machines case, the main issue was whether the exemption is available when the goods are supplied to the Contractors. The Honble Apex Court vide judgment reported in 2016 (335) ELT 827 (S.C) subsequently has affirmed the decision of the jurisdictional High Court in Caterpillar India (P) Ltd. (supra). Therefore the decision given in Bird Machines being prior to the judgment of Honble Apex Court is no longer a good law and cannot be relied upon. The jurisdictional High Court in the case of CCE, Pondicherry Vs. CESTAT, Chennai 2016 (335) ELT 211 (Mad.) has considered the eligibility of exemption Notification No. 108/1995 and followed the decision in the case of Caterpillar India (P) Ltd. (supra). It is pertinent to mention that the Honble High Court in the said judgment had disagreed with the judgment laid in the case of Bird Machines (supra). We find that in para-39 of the judgment in the case of Bird Machines, the Tribunal made an observation that benefit is available only when the goods are supplied to the project for the use at the project site. The Ld. AR has laid much thrust on the last two sentences in this para. In our view this is only a passing observation and does not lay down the ratio of the case. In other words, the issue agitated in the said case was not whether the exemption under the notification would be available if the goods are withdrawn after the completion of the project. Being only obiter dicta the same does not have precedential value. This apart, to compel the contractor that the capital goods used in the project cannot be withdrawn even after completion of the project would be highly impractical and impossible. The law does not compel a man to do that which he cannot possibly perform. Lex. non cogit ad impossibilia. The decisions in the case of Caterpillar India Pvt. Ltd. (supra), IBM India Pvt. Ltd., held that the goods supplied to Contractors were available for exemption. The goods involved in these cases are not goods such as cement or steel which form part of the project permanently. The Higher Courts have held that exemption is available even if such goods are supplied to Contractor and that supply to Contractor would mean supply to Project Authority as stated in the Notification. The department cannot then interpret the Explanation inserted in the Notification to restrict the exemption only to goods which form part of project on permanent basis. The appellant has complied with the condition of furnishing certificate of designated authorities. The department allowed clearance of the goods without any murmur on the validity of the certificate. The department cannot later turn around to deny exemption by interpreting Explanation 2 to the effect that the exemption is not available if the goods are withdrawn from project site. The contractor would not be able to retain the capital goods in the project site after completion of the project and the interpretation of Explanation 2 by the department in this angle does not find favour with us.
7. From the discussions made above and following the law laid in the above decisions, we are of the view that the denial of exemption is unjustified. The impugned order is set aside. The appeals are allowed with consequential reliefs, if any.
(Operative part of the Order pronounced in the open Court on 10.01.18)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
BB
1