Custom, Excise & Service Tax Tribunal
Jsw Steel Limited vs Commissioner Of Gst & Central ... on 1 March, 2024
1
Excise Appeal No.40836 of 2021
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
SOUTH ZONAL BENCH, CHENNAI
COURT HALL No.III
EXCISE APPEAL No.40836 of 2021
(Arising out of Order-in-Original No.27/2021-CE dated 31.08.2021 passed
by the Commissioner of GST and Central Excise, Salem Commissionerate,
No.1, Foulkes Compound, Anaimedu, Salem 636 001.)
M/s. JSW Steel Limited ...Appellant
Pottenari, Mecheri,
Mettur Taluk,
Salem - 636 453.
Versus
The Commissioner of GST & Central Excise ...Respondent
Salem Commissionerate,
No.1, Foulkes Compound,
Anaimedu,
Salem - 636 001.
APPEARANCE:
Shri. M.S. Nagaraja, Advocate
For the Appellant
Shri. N. Satyanarayanan, Assistant Commissioner (AR)
For the Respondent
CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
DATE OF HEARING : 01.02.2024
DATE OF DECISION: 01.03.2024
FINAL ORDER No.40219/2024
ORDER:Per Ms. SULEKHA BEEVI C.S. Brief facts are that the appellants are engaged in the manufacture of Iron and Steel products and are registered with Central Excise department. On perusal of records of the appellants, it was noted by the department that they have cleared excisable goods, 2 Excise Appeal No.40836 of 2021 namely M.S. Rebars without payment of duty by wrongly availing exemption under Notification no.6/2006-CE dated 01.03.2006. The above notification provides for exemption /effective rate for goods falling under Chapter Heading Nos.84 to 98 of of the Central Excise Tariff Act, 1985. In the invoices, the exact Sl.No. of the Notification under which the exemption availed, was not mentioned. The appellant was asked to clarify the Sl.No. under which they have availed the exemption. The appellant vide letter dated 07.02.2010, informed that they had cleared the goods without payment of duty to M/s.Nagarjuna Thermal Power Project, Udipi, Karnataka for setting up of a Mega Power Project, claiming exemption under Sl.No.91 and 91B of the Notification No.06/2006-CE dated 01.03.2006.
2. The department was of the view that the supply of M.S.Rebars is not against the International Competitive Bidding, as the appellant is only a sub-contractor and thus the exemption has been wrongly availed by them. Further, the notification exempts goods falling under Chapter heading No.98.01 of the First Schedule to the Customs Tariff Act. M.S.Rebars supplied by the appellant do not fall under Chapter heading No.98.01 and therefore are not eligible for exemption. The Show Cause Notice dated 16.11.2012, was issued to the appellant alleging wrongful availment of exemption Notification No.6/2006-CE dated 01.03.2006 and proposing to demand duty, interest and for imposing penalties.
3. After due process of law, the Original authority vide Order dated 20.11.2013, confirmed part of the demand being the quantity of M.S.Rebars, cleared in excess of the quantity allotted to them by the Project Authority Certificate dated 06.09.2007. A demand to the tune of Rs.2,98,14,785/- on the quantity of 7,920 metric tonnes of 3 Excise Appeal No.40836 of 2021 M.S.Rebars covered by Project Authority Certificate was dropped, however confirming the demand part of duty proposed in the SCN along with interest and also imposing penalty. The appellant filed an appeal before the Tribunal. The appellant contended before the Tribunal that part of duty has been confirmed, alleging that there is excess quantity supplied. The appellant has obtained the amended Project Authority Certificate which would cover the differential quantity also. Taking note of these arguments, the Tribunal vide F.O dt.27.06.2014 remanded the matter to the adjudicating authority to decide afresh after considering the amended Project Authority Certificate.
4. Against the Order dated 20.11.2013 passed by the Original authority, the department had also filed an appeal before Tribunal. As per Final Order No.42019/2017 dated 07.08.2017, the appeal filed by the department was allowed by way of remand, to be taken along with assesse appeal which had been already remanded to the Adjudicating Authority. Pursuant to the remand of assesse appeal as well as the department appeal, the Original authority passed the impugned de novo order, wherein the entire demand as proposed in the SCN has been confirmed along with interest and equal penalty imposed. Aggrieved by such order, the appellant is once again before the Tribunal.
5. The Learned Advocate, Shri M.S.Nagaraja appeared and argued for the Appellant.
5.1 The Appellants had entered in to Agreement dated 16 th June 2008 with M/S Lanco Infratech Ltd for supply of "Fe- 415 Grade Reinforcement Steel" (MS Rebars) for execution of Mega Power Project 4 Excise Appeal No.40836 of 2021 known as M/S Nagarjuna Thermal Power Project, Udupi. The Joint Secretary to the Government of India, Ministry of Power vide Certificate dated 11.04.2007 certified that Nagarjuna Power Project is being set up by M/S Nagarjuna Power Corporation Ltd and is an Inter-State Thermal Power Plant of Capacity of 1015 MW and that the Power Purchasing States have constituted the Regulatory Commissions with full powers to fix the tariff and that the power purchasing states undertake, in principle, to privatize distribution in all cities in that State which has a population of more than one million. The Mega Power Project was later renamed as M/S Udupi Power Corporation Ltd as per the Fresh Certificate of incorporation consequent to change of name. 5.2 The Appellants claimed exemption from payment of Excise Duty on MS Rebars supplied to the Mega Power Project at Udupi under SI. No. 91 of Notification No. 6/2006-CE dated 01.3.06. 5.3 The Commissioner in the impugned de novo Order has denied exemption for MS Rebars supplied for execution of the Mega Power Project as recorded in Para 22 and 23 of the Impugned order. 5.4 The Commissioner has recorded in Para 22.02 of the impugned order that in order to avail exemption in terms of Sl No 91 of Notification No 6/2006 CE dated 1.3.2006, the manufacturer/supplier of goods should have participated in the International Competitive Bidding and get the contract for supply of goods. In the instant case, M/S Lanco Infratech Ltd have participated in the tendering process of International Competitive Bidding and won the bid for supply of goods to Mega Power Project. JSW Steel Ltd have not participated in the 5 Excise Appeal No.40836 of 2021 bidding process, but got orders from M/S Lanco Infratech Ltd for supply of MS Rebars to the project to set up Mega Power Plant. Thus, the supply of MS Rebars by JSW Steel Ltd is not against International Competitive Bidding but only cleared to M/S Lanco Infratech Ltd. It is concluded by Original authority that JSW Steel Ltd, a sub-contractor has no role in the bid called for and thus they cannot be said to be supplier of goods against International Competitive Bidding. 5.5 The Commissioner has recorded in Para 23 of the impugned order that the necessity to consider the amended project certificate arise only if the assesse satisfies the condition in Sl No 91 of Notification No 6/2006 CE dated 1.3.2006. Condition No 91 (actually Condition NO 19) requires that the goods are exempt from Customs Duties leviable under Section 3 of the Customs Tariff Act when imported in to India. Entry No. 400 of Notification No. 21/2002-Cus dated 01.03.2002, as amended, exempts goods falling under Chapter Heading 98.01 required for setting up any Mega Power Project as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power; that M/s JSW had cleared only MS Rebars which is not covered under Chapter Heading 98.01 of the Customs Tariff Act and hence Condition No. 91 of Notification No. 6/2006-CE is not satisfied and JSW is not eligible to clear the goods without payment of duty.
5.6 The Ld. Commissioner has erred in not correctly reading exemption Notification No 6/2006 CE dated 1.3.2006. The settled legal position and the clarification by the CBIC with regard to exemption 6 Excise Appeal No.40836 of 2021 available to the sub-contractors supplying goods for Mega Power Projects was not considered.
5.7 The Ld Commissioner has not recorded any other ground for denying the benefit of exemption as claimed.
5.8 The Appellants submit that exemption under Sl No 91 of Notification No 6/2006 CE dated 1.3.2006 reads as under:
Sl Chapter Description of Rate Condition
No Heading goods
91 Any Chapter All goods supplied
against Nil 19
International
Competitive Bidding
Conditions:
Condition If the goods are exempted from the duties of
No 19 Customs leviable under the First Schedule to the
Customs Tariff Act, 1975 and the additional duty
leviable under Section 3 of the said Customs
Tariff Act when imported in to India
5.9 The Appellants submit that Sl No 91 exempts all goods supplied against International Competitive Bidding. The condition is that the goods should be supplied to a project awarded under the procedure of International Competitive Bidding. There is no condition that each supplier of the goods ought to have participated in the International Competitive Bidding and awarded the contract of supply. Such a condition not stipulated, but considered by the Commissioner in the impugned order, is impossible for performance. The Project Authority Certificate NPCL/HO/PAC/001-A dated 06.09.2007 issued by the Chief Executive Officer, M/S Nagarjuna Power Corporation Limited confirms that the said Mega Power Project was awarded against International Competitive Bidding. The Project Authority Certificate 7 Excise Appeal No.40836 of 2021 NPCL/HO/PAC/001-A dated 06.09.2007 has also certified that M/S Lanco Infratech Ltd has been awarded a contract for supply of goods of value, quantity and description as mentioned therein under Contract dated 24.12.2006. The PAC contains the names of sub-contractors. JSW Steel Ltd having its Depot at Bangalore (M/S Southern Iron & Steel Company Ltd as it was then known) is required to supply "Fe-500 Grade Reinforcement Steel"/"Fe-415 Grade Reinforcement Steel" of different dimensions. The supply of MS Rebars thus satisfies the conditions prescribed under Notification No 6/2006 CE dated 01.03.2006. 5.10 With respect to Condition NO 19 in Notification NO 6/2006 CE dated 1.3.2006, it is submitted that reference is made to Sl No 400 of Notification No 21/2002 Cus dated 01.3.2002 and Condition No 86 which are reproduced below:
400 98.01 Goods required for setting up of Nil Nil 86 any Mega Power Project specified in List 42, if such Mega Power Project is -
(a) an inter-State thermal power plant of a capacity of 1000 MW or more; or
(b) an inter-State hydel power plant of a capacity of 500 MW or more, as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power, Condition
(a) If an officer not below the rank of a Joint No 86. Secretary to the Government of India in the Ministry of Power certifies that-8
Excise Appeal No.40836 of 2021
(i) the power purchasing State has constituted the Regulatory Commission with full powers to fix tariffs;
(ii) the power purchasing State undertakes, in principle, to privatise distribution in all cities, in that State, each of which has a population of more than one million, within a period to be fixed by the Ministry of Power; and,
(iii) the power purchasing State has agreed to provide recourse to that State's share of Central Plan allocations and other devolutions towards discharge of any outstanding payment in respect of purchase of power;
(b) In the case of imports by a Central Public Sector Undertaking, the quantity, total value, description and specifications of the imported goods are certified by the Chairman and Managing Director of the said Central Public Sector Undertaking; and
(c) In the case of imports by a Private Sector Project, the quantity, total value, description and specifications of the imported goods are certified by the Chief Executive Officer of such project.
5.11 It is submitted that the conditions prescribed against Sl No 400 are self-contained and applies to all goods. In the present case, the Joint Secretary to the Government of India in the Ministry of Power has issued Certificate dated 11.4.2007 certifying the requirements as specified in the Exemption Notification. MS Rebars, if imported as being required for setting up of Mega Thermal Power Project are eligible for exemption from levy of Customs Duties under Sl No 400 of Notification No 21/2002 Cus dated 1.3.2002. Therefore, Condition No 19 of Notification No 6/2006 CE dated 1.3.2006 stands fully satisfied. 9
Excise Appeal No.40836 of 2021 5.12 The observation in Para 23 of the order that Notification 21/2002 Cus dated 1.3.2002 exempts goods falling under CTH 98.01 of the First Schedule to the Customs Tariff Act, 1975 and that CTH 98.01 does not include MS Rebars is an improper reading of the Notification. 5.13 It is submitted that CHH 98.01 is for "project import" to facilitate import of the goods under a common Chapter Heading and concessional rate of Customs Duty without considering the classification of individual goods required for the project as specified. Chapter Notes 1 and 2 under Chapter 98 of the Customs Tariff Act, 1975 are as under:
Note 1: - This Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein, even though they may be covered by a more specific heading elsewhere in this Schedule.
Note 2: - Heading 9801 is to be taken to apply to all goods which are imported in accordance with the regulations made under Section 157 of the Customs Act, 1962 and expressions used in this heading shall have the meaning assigned to them in the said Regulation.
5.14 In view of the above, the denial of exemption on the ground that CTH 98.01 does not include MS Rebars is patently erroneous.
5.15 Sl No 400 of Notification No 21/2002 Cus dated 1.3.2002 refers to "all goods required for setting up of Mega Power Project". The goods imported, irrespective of their individual classification and rate of duty, intended for use in execution of a project specified under CTH 98.01 are eligible for the benefit of exemption from Customs Duties. CTH 98.01 includes "Power Projects". Thus, the goods imported under 10 Excise Appeal No.40836 of 2021 Project Import and intended for use in execution of Mega Power Project are eligible for exemption from Customs Duties in terms of Sl No 400 of Notification No 21/2002 Cus dated 1.3.2002 is satisfied.
5.16 In view of the above, it is submitted that the Appellants have fulfilled the conditions prescribed under Sl No 91 of Notification No 6/2006 CE dated 1.3.2006 for supply of MS Rebars to M/S Lanco Infratech Ltd who was awarded the contract through International Competitive Bidding for execution of Civil Works for Mega Power Project under the name of Udupi Power Corporation Ltd and hence eligible for exemption. The impugned order is contrary to law and deserves to be set aside.
5.17 The Appellants rely on the CBEC (TRU) Clarification dated 10.7.2014 after introduction of the Finance Bill, 2014. ANNEXURE III contains clarifications on various issues. Sl NO 4 under the head CENTRAL EXCISE has clarified the eligibility of the goods supplied against International Competitive Bidding (ICB) for exemption as under:
"(4) .. All goods falling under any chapter supplied against International Competitive Bidding (ICB) are fully exempt from excise duty (Sl.No. 336 of Notification No. 12/2012-CE dated 17.3.2012) subject to the condition: "If the goods are exempted from the duties of customs leviable under Section 3 of the said Customs Tariff Act when imported into India". A doubt has been raised whether the excise duty exemption under this notification is available to sub-contractors who supply goods to the main contractor who has won the ICB contract. It is clarified that the said exemption is also available to sub-contractors for manufacture and supply of goods for or on behalf of the main contractor (who has won the bid for the project through ICB) for execution of the said project, subject to compliance of conditions specified, if any.11
Excise Appeal No.40836 of 2021 5.18 The Appellants rely on the following judgments on the same issue and similar facts:
(i) Kent Introl Pvt Ltd Vs CCE, Nashik
2014 (301) ELT 84 (Tri - Mum)
Affirmed by the Hon High Court of Bombay
2016 (331) ELT 77 (Bom)
(ii) Toshniwal Indus Pvt Ltd Vs CCE, Jaipur II
2017 (5) GSTL 179 (Tri - Del)
(iii) Sarita Steels & Industries Ltd Vs CCE, Vizag
2011 (264) ELT 313 (Tri - Bang)
(iv) CST Ltd Vs CCE, Hyderabad I Commissionerate
2007 (217) ELT 513 (T)
Department's Appeal dismissed for non-prosecution 2016 (339) ELT A 151 (AP)
(v) Crompton Greaves Ltd Vs CCE, Mumbai III 2015 (317) ELT 600 (Tri - Mum)
(vi) CST Limited Vs Commissioner of Customs & Central Excise, Hyderabad - 2008 (230) ELT 85(Tri. - Bang.)
(vii) Ganges International Pvt Limited Vs CCE, Raipur 2014 (308) ELT 106 (T)
(viii) Om Metals Vs CCE & ST, Jaipur 2013 (298) ELT 79 (T)
2. The ratio of the above judgments applies to the facts of the case. 5.19 Goods supplied in excess of the Project Authority Certificate:
5.19.1 The Appellants have submitted the details of the quantity of MS Rebars supplied to M/S Lanco Infratech Ltd, the quantity as per the amended PAC, the quantity rejected and returned by the Project and excess quantity supplied. The Commissioner has recorded the said submission in Para 16 of the impugned order.
5.19.2 The Appellants have submitted that after considering the additional quantity of 5800 MT of Rebars included in the PAC and return 12 Excise Appeal No.40836 of 2021 of 103.09 MT of MS Rebars found to be defective the excess quantity of MS Rebars supplied works out to 1184.620 MT and the duty thereon works out to Rs. 26,45,001/-
5.19.3 The Appellants submit the Commissioner has specifically held in Para 23 of the impugned order that consideration of the "amendments to Project Authority Certificate" arises only if the assesse is entitled to exemption under Notification No 6/2006 CE dated 1.3.2006.
The Appellants submit that:
(i) The SCN has not made out any ground that the quantity of MS Rebars supplied in excess of the quantity shown in the Project Authority Certificate is not eligible for exemption under Notification NO 6/2006 CE dated 1.3.2006,
(ii) While allowing exemption for the goods supplied to Mega Power Project the demand of duty on 1184.62 MT of MS Rebars supplied in excess of the PAC amounts to demand of duty on the grounds beyond the scope and basis of the SCN,
(iii) there is no dispute that the entire quantity of MS Rebars was supplied to M/S Lanco Infratech Ltd for the Mega Power Project and hence eligible for exemption under Notification No 6/2006 CE dated 1.3.2006.
5.19.4 It is well settled position in law that the demand cannot travel beyond the scope of the SCN. The Appellants rely on the following judgments:
13
Excise Appeal No.40836 of 2021
(i) Hindustan Polymers Co Ltd vs CCE, Guntur 1999 (106) ELT 12 (SC)
(ii) CCE, Nagpur vs Ballarpur Industries Ltd 2007 (215) ELT 489 (SC)
(iii) CC, Mumbai vs Toyo Engineering India Ltd 2006 (201) ELT 513 (SC) 5.20 Limitation:
The SCN issued on 16.11.2012 proposed to deny the exemption on MS Rebars cleared to M/s Lanco Infratech Limited during the period from November 2007 to December 2009.
5.21 The Appellants submit that the Commissioner has recorded finding on submissions made with regard to the demand being barred by limitation in Para 24.01 of the impugned order.
5.22 The Appellants submit that the findings of the Commissioner are evidently contrary to the documents on record. The Appellants in their letter dated 29.10.2007 addressed to the Jurisdictional Superintendent of Central Excise, Mettur II informed that they have received order from Lanco Infratech Ltd for supply of MS Rebars for Mega Power Project, M/S Nagarjuna Thermal Power Project 2 x 507.5 MW, Udupi and enclosed copies of the documents, as stated in the letter, and sought permission, if necessary, with regard to exemption for the goods to be supplied. There was however, no response from the Department.
5.23 The clearance of MS Rebars under Notification No 6/2006 CE dated 1.3.2006 are recorded in the Invoices, Books of accounts and monthly ER 1 Returns.14
Excise Appeal No.40836 of 2021 5.24 The Internal Audit Party has audited the Books on 3 occasions during the period from February 2008 to November 2010 and Central Excise Revenue Audit on 2 occasions between January 2010 and February 2010.
5.25 The Department vide letter dated 19.11.2010 contended that MS Rebars is not covered under Heading 98.01 of the First Schedule to the Customs Tariff Act, 1975 and directed payment of duty on the goods cleared from October 2009 to December 2009 along with interest. In response, the Appellants submitted letter dated 07.12.2010 explaining their stand and eligibility for exemption under Notification No 6/2006 CE dated 1.3.2006.
5.26 The Appellants had evidently submitted all the relevant details to the Department long before commencement of clearance of the goods to M/S Lanco Infratech Ltd for use in the Mega Power Project under Notification No 6/2006 CE dated 1.3.2006. The facts were thus completely in the knowledge of the jurisdictional and audit authorities and there is no scope for allegations of willful mis-statement, suppression of facts and contravention of the CEA, 1944 and the Rules thee under with intention to evade payment of duty. The Ld. Counsel prayed that appeal may be allowed.
6. The Learned Authorised Representative, Shri N.Satyanarayanan, appeared for the Department.
6.1 It is submitted that M S Rebars do not fall under Chapter 98.01 of Customs Tariff Act, 1975 and therefore the appellants are not eligible for Benefit of Notification No.6/2006. Further, Condition No.19 has to be fulfilled as per the notification. In the present case, the said 15 Excise Appeal No.40836 of 2021 condition states that the goods are to be exempted from the Customs Duties leviable under Section 3 of the Customs Tariff Act, when imported into India. The appellant contends that Notification No.21/2002-CUS dated 01.03.2002 exempts the goods. The M S Rebars, is not covered under Chapter Heading 98.01 of the Customs Tariff Act and hence Condition No.19 of Notification No.6/2006-CE has not been satisfied. It is prayed that the appeal may be dismissed.
7. Heard both sides.
8. The issue to be decided is whether the appellant is eligible for benefit of Notification No.6/2006-CE dated 01.03.2006 for the goods supplied.
9. The Original authority has held that the appellant is not eligible for exemption under Notification No.6/2006-CE dated 01.03.2006 for two reasons.
(i) The appellant is a sub-contractor and has not participated in the International Competitive Bidding and they have not been awarded any contract for supply of goods. M/s.Lanco Infratech Ltd have participated in the tendering process of International Competitive Bidding and won the bid for supply of goods to M/s.Nagarjuna Thermal Power Project, Udupi.
(ii) The appellant has availed exemption under Condition No.19 of the Notification No.6/2006-CE dated 01.03.2006. As per this condition, the goods shall be exempted from the Customs duty under Customs Tariff Act, 1975 when imported into India. The goods referring to Chapter 98.01, are not eligible for exemption as per Notification No.21/2002 Cus dated 01.03.2002. 16
Excise Appeal No.40836 of 2021
10. We may now proceed to analyse the allegations and submissions. Admittedly, the appellant is a sub-contractor who has supplied goods to the main contractor, M/s.Lanco Infratech Ltd, who has participated in the International Competitive Bidding. The issue whether the sub- contractor, who has supplied the goods to the main contractor, who has participated in the International Competitive Bidding is eligible for exemption has been clarified by vide Board Circular dated 10.07.2014. The relevant part of the Circular reads as under:
All goods falling under any Chapter supplied against International Competitive Bidding (ICB) are fully exempt from excise duty [Sl.No.336 of notification No.12/2012-CE dated 17.03.2012], subject to the condition: "If the goods are exempted from the duties of customs leviable under the First Schedule to Customs Tariff Act 1975 and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India". A doubt has been raised whether the excise duty exemption under this notification is available to sub-contractors who supply goods to the main contractor who has won the ICB contract. It is clarified that the said exemption is also available to sub-contractors for manufacture and supply of goods for or on behalf of the main contractor (who has won the bid for the project through ICB) for execution of the said project, subject to compliance of conditions specified, if any.
11. So also the Tribunal in the case of Kent Introl Pvt Ltd Vs CCE, Nashik 2014 (301) ELT 84 (Tri-Mum) has held that when the supply of goods are made to the main contractor who has participated in the International Competitive Bidding and has been awarded the contract; the sub-contractor is also eligible for exemption under Notification No.6/2006-CE dated 01.03.2006. The relevant part reads as under:
"2. The appellant, M/s. Kent Introl Pvt. Ltd., Nashik, supplied Globe Control Valves to M/s. Essar Offshore Subsea Ltd. and M/s. Swiber Offshore Construction Pte. Ltd., Singapore and claimed benefit of Serial No. 91 of the table annexed to Notification No. 6/2006, dated 1-3-2006. The said Notification granted exemption to "goods supplied against International Competitive Bidding. Subject to Condition No. 19". Condition No. 19 17 Excise Appeal No.40836 of 2021 stipulated that the goods are exempted from duties of Customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India. Customs Notification No. 21/2002, dated 1-3-2002 vide Serial No. 214 granted exemption to goods specified in List 12 required in connection with petroleum operations undertaken under petroleum exploration licenses or mining leases, granted by the Government of India or any State Government to the Oil and Natural Gas Corporation or Oil India Ltd. on nomination basis and the exemption was subject to Condition No. 29. List 12 of the said Notification covers all types of valves including high pressure valves. Condition No. 29 of the Customs Notification also stipulated that the importer shall produce an essentiality certificate from the Directorate General of Hydro Carbons (DGHC). In one of the appeals the claim for benefit of exemption under Notification 6/2006 has been rejected on the ground that the supply is not against International Competitive Bidding. In another appeal, the lower appellate authority had denied the benefit on the ground that the appellant has not produced essentiality certificate from the DGHC. Accordingly, duty demands of ` 11,33,279/- and ` 9,10,818/- were confirmed along with interest thereon and also imposing equivalent amount of penalties. Aggrieved of the same, the appellant is before us.
3.3 The Consultant also relies upon the decision of this Tribunal in the case of CST Ltd. v. Commissioner of Central Excise, Hyderabad - 2008 (230) E.L.T. 85 wherein also a similar issue came up in respect of supplies made by the appellant therein in respect of a project undertaken by M/s. BHEL to set up a super thermal power plant. In the said decision it was held that the goods supplied by a sub-contractor to main contractor who was executing mega project by International Competitive Bidding would also be eligible for the benefit of exemption under Notification No. 6/2002-C.E., dated 1-3-2002 as amended by Notification No. 48/2004-C.E., dated 10-9-2004. Notification 6/2006 is the successor Notification to the Notification 6/2002 and therefore the ratio of the said decision would apply in respect of Notification 6/2006 also as the wordings of the exemption are identical. It is accordingly prayed that the appeals be allowed.
4. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, contends that in respect of imported goods, essentiality certificate from DGHC is required to be produced for claiming the benefit and therefore, the said condition would apply to supplies made by the domestic manufacturer also. Inasmuch as this condition is not satisfied, the appellant is not eligible for the benefit of exemption. Accordingly, he prays for upholding the impugned orders.
5. We have carefully considered the submissions made by both the sides.
5.1 From the certificate given by the Project Implementing Authority, it is clear that the appellant has made the supply in respect of a contract awarded under International Competitive Bidding and the goods are required in connection with the petroleum operations undertaken under petroleum exploration licence or mining leases and the certificate had been issued by the General Manager (Project), Oil and Natural Gas Corporation. Therefore, it is clear that the goods have been supplied against a contract granted under International Competitive Bidding. From the said certificate is also seen that the appellant's name figures as a sub-contractor and the goods supplied by the appellant is also covered by the said certificate. It is clear from the project authority certificate that the goods are required in petroleum operations undertaken by ONGC."18
Excise Appeal No.40836 of 2021 (emphasis supplied) The Hon'ble High Court of Bombay 2016 (331) ELT 77 (Bom) has upheld the above decision of the Tribunal.
12. The Tribunal in the case of Toshniwal Indus Pvt Ltd Vs CCE, Jaipur II 2017 (5) GSTL 179 (Tri-Del) has taken a similar view, which held that the sub-contractor is also eligible for the Benefit of Notification. The relevant para reads as under:
"6. After hearing both sides and on perusal of record, it appears that the Tribunal has decided (supra) that it is not necessary that the manufacturer supplying the goods to the mega power projects should have participated in International Competitive Bidding so long as the goods are supplied to such contract was awarded to a person who took part in the International Competitive Bidding and it is proved that the goods were in fact supplied to such power project and the equipments were installed at the project site. What we noticed is that neither the benefits under Notification No. 21/2002- Cus. (Sr. No. 400) nor the exemption under Notification No. 6/2006-C.E. (Sr. No. 91) is subject to any conditions stipulated in Foreign Trade Policy. BHEL as the main contractor could have imported the impugned goods without payment of Customs duty in view of Notification No. 21/2002-Cus. (Sr. No. 400). Notification No. 6/2006-C.E. Sr. No. 91 only makes it possible to procure such goods locally without payment of excise duty if BHEL so desires and BHEL opted for local procurement from the assessee- appellants. So, naturally the assessee-appellants should be eligible for exemption under Notification No. 6/2006-C.E. (Sr. No. 91). Prima facie, the deemed export benefits dealt within para 8.6.1 and 8.6.2 deal with incentive granted by DGFT and not exemption granted by Ministry of Finance and there is no reason to refer to those conditions so long as they are not referred to in the Notification claimed. The main point to be noticed is that relief from excise duty is not granted through the mechanism of deemed export but administered through exemption notification issued. We note that Revenue has not made any case that any of the conditions specified in the exemption notification is not fulfilled. It is already decided by the Tribunal (supra) that exemption cannot be denied for the reason that sub-contractor did not take part in International Competitive Bidding."
(emphasis supplied)
13. From the above, we hold that the view taken by the Adjudicating Authority that the goods are not eligible for exemption for the reason that the appellant is only a sub-contractor is not justified.
14. The second ground on which the Benefit of Exemption has been denied is by alleging that the appellant has not satisfied Condition 19 Excise Appeal No.40836 of 2021 No.19 of the Notification No.6/2006. The condition has already been noticed as above. It requires to be stated that CH 98.01 is specifically for goods of "project import". To facilitate import of such goods, a common Chapter Heading is given and concessional rate of Customs Duty without considering the classification of individual goods required for the project. In notification 21/2002-CUS dt.01.03.2002, the said Chapter Heading reads as under:
400 98.01 Goods required for setting up of Nil Nil 86 any Mega Power Project specified in List 42, if such Mega Power Project is -
(a) an inter-State thermal power plant of a capacity of 1000 MW or more; or
(b) an inter-State hydel power plant of a capacity of 500 MW or more, as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power.
14.1 The above Chapter Heading has to be taken for application to all goods supplied for project import. The goods irrespective of their individual classification and rate of duty, if intended for use in execution of a project which is satisfied under CTH 98.01 are eligible for Benefit of Exemption from Customs duties. Thus, goods imported when intended for use in Mega Power Project are eligible for exemption from Customs duties, in terms of Sl.No.400 of Notification No.21/2002-CUS dt. 01.03.2002. The condition prescribed under Sl.No.91 of Notification No.6/2006 thus stands satisfied.
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Excise Appeal No.40836 of 2021 14.2 In the case of Sarita Steels and Industries Limited Vs Commissioner of Central Excise, Vizag 2011 (264) ELT 313 (Tri-Bangalore) the issue considered was that whether the angles, channels, beams, etc. supplied by the assesse to M/s.Bharat Heavy Electricals Limited, was eligible for exemption under Notification No.6/2006. The goods having been intended to use for the Mega Power Project, the Tribunal held that the goods would be relatable to Chapter Heading 98.01 and would be eligible for Benefit of Exemption of under Notification No.21/2002. This being the fact that such angles, channels, beams, etc. would fall under Chapter Heading 72 of Customs Tariff Act, 1985.
"10. As has been stated by us earlier, it is undisputed that the mega power project which was sought to be executed by BHEL has complied with the conditions of getting a certificate from an officer not below the rank of Jt. Secretary, Govt, of India in the Ministry of Power. After being awarded a contract for setting up a mega power project, for the execution of the same, BHEL appointed M/s. Jindal Power Ltd. as sub-contractor. M/s. Jindal Power Ltd. in turn had procured angles, beams, channels etc from the appellant for execution of such meca power project. We find that the SSIL has not participated in the international competitive bidding, but had cleared the said goods to M/s. Jindal Power Ltd. for execution of mega power project. This being undisputed fact, we find that the decision of this Bench in the case of CST Ltd. (supra) squarely covers the issue. We may reproduce the said ratio which reads as under:
"6. The learned Advocate brought to our notice the relevant conditions of the exemption Notification. In terms of Notification No. 48/2004, against Sl. No. 301, "all goods supplied against International Competitive Bidding, falling under any Chapter" are exempted subject to condition 64 of the Notification. Condition 64 reads as follows:-
"64. If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India,"
It is not in dispute that the goods imported for supply to Mega Projects are entitled to whole duty exemption under Customs Tariff Act. The next thing to be examined is whether the goods supplied are against International Competitive Bidding. The appellants are a sub- contractor of M/s. BHEL. M/s. BHEL is executing the Mega Project for Kahalgaon Super Thermal Power Project by International Bidding. The appellants have submitted ail the relevant records. The appellants are also found in the list of sub-contractors. Since the goods are supplied by the appellants to BHEL, who are executing the project by International Competitive Bidding, it is very clear that the goods cleared by the appellants should be considered as "goods supplied against International Competitive Bidding". There is absolutely 21 Excise Appeal No.40836 of 2021 no need that the appellants themselves should have been the bidder in International Competitive Bidding. In huge projects, the main contractor does not do everything. There is always a system of sub-contractors. If we take a view that the goods cleared by sub-contractors are not entitled for exemption on the ground they are not the bidders, the very purpose of the Notification would be defeated because the main contractor will be having hundreds of sub- contractors in Mega Projects. In our view, inasmuch as the appellants had supplied the goods to M/s. BHEL, who are the bidders of International Competitive Bidding, the condition of the Notification is satisfied and there is no justification for denying the exemption notification to the appellant. The Tribunal, in the case of Automatic Electric Ltd. v. CCE, Mumbai - 2004 (178) E.L.T. 524 (Tri.-Mumbai), has held that the benefit of exemption under Notification 108/95-C.E. is available to a sub-contractor when M/s. BHEL is the main contractor of an approved project. The fact that there was a contract between the main contractor and the sub- contractor will ensure that supplies made eventually reach the project site. The ratio of the above case is clearly applicable to the present case. In these circumstances, we set aside the impugned order and allow the appeals with conseguential relief, if any." It can be seen that in the said case of CST Ltd., an identical issue was raised and again in respect of the very same executor of mega power project i.e. BHEL. We find that the ratio as reproduced hereinabove squarely covers the issue in favour of the assessee.
11. As regards submissions made by ld. SDR, we find that the wordings of the Notification No. 21/2002-Cus. categorically indicates that the "goods" which are required for execution of mega power project are exempted. It is undisputed in the case before us that channels, beams, angles are goods required for execution of mega power project. In view of this, the decision of the Hon'ble Supreme Court cited by the ld. SDR will not carry Revenue's case any further.
12. In view of the foregoing reasons, we hold that the impugned order is not in consonance with law and is unsustainable and is liable to be set aside and we do so. The impugned order is set aside and all the appeals are allowed with consequential relief, if any. 14.3 The Tribunal in the case of Ganges International Pvt Limited Vs Commissioner of Central Excise, Raipur 2014 (308) ELT 106 (T) considered the same issue and held that the case is in the nature of General Fabrication Structures, Auto Welded Beams and Boxes, cleared by appellants for use in the Mega Power Project would be eligible for benefit of notification.
"6. The goods supplied to Kawai Thermal Power Project, Sagardighi Thermal Power Project and Shree Singaji Thermal Power Project are against international competitive bidding even though in respect of these projects, the contracts were awarded through tariff based competitive bidding. During the period of dispute, Sl. No. 91 of the table to the exemption Notification No. 6/2006-C.E. read with condition No. 19 and Sl. No. 336 of the table to the Notification No. 12/2012-C.E., dated 17-3-2012 read with condition No. 41 of this notification, exempted all the goods supplied against international competitive bidding 22 Excise Appeal No.40836 of 2021 from whole of the duty excise leviable thereon and the condition to which this exemption was available was that the goods if imported into India are fully exempt from Customs duty. There is no dispute that the goods, if imported into India, would be exempt from Customs duty in terms of Sl. No. 400 of the Notification No. 21/2002-Cus. read with condition No. 86, as in terms of this condition, the appellant have produced the required certificates from Joint Secretary to the Government of India. The department, however, is of the view that since in respect of these power projects, the supply of power had been tied up through tariff rate competitive bidding or the project has been awarded to a developer on the basis of such bidding, it is Sl. No. 91B of the Notification No. 6/2006-C.E. and Sl. No. 338 of the Notification No. 12/2012-C.E., dated 17-3-2012 which would be applicable for which the conditions are different and the same have not been satisfied. We are of the view that when exemption is available to the appellant in terms of two Sl. Nos. 91 as well as 91B Notification No. 6/2006-C.E. and 336 as well as 338 of the table to Notification No. 12/2012-C.E. and since the appellant satisfy the conditions of the Notification No. 6/2006-C.E./(Sl. No. 91) and Notification No. 12/2012-C.E. (Sl. No. 338), the exemption in terms of this Sl. No. cannot be denied, as exemption under this Sl. No. is available to any goods supplied by a manufacturer in India against international competitive bidding. Therefore, the impugned order denying the exemption in respect of the three projects, mentioned above, is not sustainable.
7. As regards, the goods supplied to Prayagraj Super Thermal Mega Power Project, there is no dispute that the project is a mega power project awarded to a developer through tariff based competitive bidding and the appellant have claimed exemption in terms of Sl. No. 91B of Notification No. 6/2006-C.E. and Sl. No. 338 of Notification No. 12/2012- C.E. The Commissioner has given finding that the requisite conditions for this exemption are satisfied inasmuch as a certificate by an officer not below in the rank of Chief Engineer certifying that the said goods are meant for setting up of said mega power project and also an undertaking from Chief Executive officer of the project to the Deputy/Assistant Commissioner, that the goods would be used only in the said mega power project and in the event of non-compliance of this exemption, the duty would be payable by the project developer have been produced. However, here the objection of the Commissioner is that the goods supplied - General Fabrication Structures and Auto Welded Beams and Boxes, are not covered by the description of the goods mentioned against Sl. No. 91B of the Notification No. 6/2006-C.E. and Sl. No. 338 of the Notification No. 12/2012-C.E., as the Commissioner is of the view that "these goods are generally used for making shades and supporting structures for capital goods". In our view, even if the General Fabrication Structures, Auto Welded Beams and Boxes cleared by the appellant are meant to be used as Supporting Structure for some machinery, the same would have to be treated as component parts of that machinery as the description of goods against Sl. No. 91B of Notification No. 6/2006-C.E., Sl. No. 338 of Notification No. 12/2012-C.E. covers all components whether finished or not and raw materials for the manufacture of the items of machinery, prime movers, instruments, apparatus, appliances, control gear, transmission equipments etc. In view of this, the impugned order denying exemption to the goods supplied to Prayagraj Super Thermal Mega Power Project is also not sustainable.
8. In view of the above discussion, the impugned order is not sustainable. The same is set aside. The appeal as well as stay application are allowed. The miscellaneous 23 Excise Appeal No.40836 of 2021 application also stands disposed of."
14.4 In the case of OM Metals Vs Commissioner of Central Excise & ST, Jaipur 2013 (298) ELT 79 (T) the issue considered was that whether the goods are classifiable under Chapter Heading 73 of Customs Tariff Act, when supplied for use in project is eligible for Benefit of Notification No.6/2006.
"8. The appellants submitted the certificates issued by the Joint Secretary, Government of India, Ministry of Power and these certificates were examined by the Commissioner and in para 24 of the order he held that certificates are not in dispute and condition No. 86 stands satisfied. The Commissioner has denied the exemption under Notification No. 6/2006, dated 1-3-2006 on the ground that S. No. 400 of the Notification No. 21/2002, dated 1-3- 2006 applies to goods classifiable under Chapter 98.01 of the Customs Tariff and for availing the benefit of Notification 21/2002 for goods of 98.01 requirements of Project Import Regulation, 1986 are to be satisfied and he denied the benefit of Notification to their goods Gate & Gate Parts classifiable under Chapter 73 of the Tariff for non-fulfilment of Project Import Regulation, 1986.
9. We find that goods in question are classifiable under Chapter 73 of the Tariff. Under Central Excise Tariff there is no Heading 98.01 and which exists in Customs Tariff only. Since the goods manufactured in India can not be classified under 98.01 of the Central Excise Tariff, denial of the exemption on the ground of non-fulfilment of condition of Project Import Regulation is not sustainable particularly when condition No. 86 of the Notification No. 21/2002, dated 1-3-2002 is fulfilled by them. Similar submissions were made by Revenue for denying the benefit of Notification 6/2006, dated 1-3-2006 on the ground of non-fulfilment of conditions of the Project Import Regulation in case of Sarita Steels and Industries Ltd. reported in 2011 (264) E.L.T. 313 and Tribunal in that case allowed the exemption under Notification 6/2006, dated 1-3-2006 to the assessee. We therefore hold that appellants are eligible for exemption under Notification 6/2006, dated 1-3-2006 and accordingly set aside the impugned order and allow the appeal."
15. From the above, it is clear that the supply of goods required to set up mega power project is covered by Chapter Heading 98.01. The Project Authority Certificate issued to the appellant clearly states that the goods have been supplied for Nagarjuna Thermal Power Project, Udupi. This being the fact, the order passed by the adjudicating authority that M S Rebars do not fall under CH 98.01 is erroneous and not supported by any basis. 16. In view of the above, we find that the denial of exemption is without any legal or factual basis. We hold 24 Excise Appeal No.40836 of 2021 that the appellant is eligible for exemption under Notification No.6/2006-CE dated 01.03.2006.
17. In the result, the Impugned Order is set aside. The appeal is allowed with consequential reliefs, if any.
(Pronounced in court on 01.03.2024)
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
Member (Technical) Member (Judicial)
pr