Whether clearance of goods for projects eligible for exemption available when they were not cleared to Project Implementing Authority?

PJ/Case Law/2013-14/1674

Case:-THE COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY VERSUS M/s CATERPILLAR INDIA PVT LTD

Citation-: 2013-TIOL-562-HC-MAD-CX

Brief Facts:-It is seen from the order of the Authorities below that the respondent herein are manufacturer of variety of earth-moving equipment and some of their products were cleared under Notification No.108/95 dated 28.08.1995 to the Contractors executing the "Golden Quadrilateral Road Project" financed by United Nations and International Organisation, thus, thereby, claimed exemption from duty.

The claim of the assessee was however disputed by the Revenue by issuing a show cause notice demanding duty of Rs.89,74,400/- on the ground that the assessee had cleared the goods to the Contractors on the respective projects and not to the Project Implementing Authority themselves and that the contractors continue to be the owners of the goods even after the completion of the projects.

Appellant’s contention:-The contention of the appellant that claim of the assessee was however rejected by the Commissioner of Central Excise and reconfirmed the earlier view by pointing out that the only authority to whom the machineries could be given was only the project implementing authority and there was nothing to show that the goods in question were given to the project implementing authority, thus, the demand raised proposal was confirmed. Apart from this, penalty of Rs.25,00,000/- (Rupees Twenty five lakhs only) under Rule 25 of Central Excise Rules, 2002 was also ordered.

Respondent’s contention:-The contention of the Revenue was contested by the respondent by filing a reply stating that expression 'intended to be supplied to' has not been defined. The assessee contended that the said phrase has to be understood as one required for implementation of the Project as appearing in Sub Clause (i) and (ii) of Clause (c) of proviso of Notification; thus, the question of rejection of the benefit under the Notification does not arise. The assessee pointed out that when the object of the Notification is met, the exemption could not be rejected.

Aggrieved by this, the assessee went on appeal before the CESTAT, who agreed with the assessee's contention by following the decisions of the Tribunal in Toyo Engineering India Ltd Vs. CC, Mumbai reported in 2000 (122) ELT 315. The Tribunal pointed out that it was not the case of the Department that the goods had not been supplied to the projects financed by the International Organisation. The CESTAT further pointed out that there is nothing on record to show that the goods were used in any other project other than in implementation of the Golden Quadrilateral Project ; considering that the goods had admittedly been used in the project and after the completion of the projects, the goods supplied to the various Sub-Contractors were entrusted to retain the goods supplied could not stand in the way of granting the exemption under the Notification. Further there was no evidence that the goods in question were used in any other project after the implementation of Gold Quadrilateral Project. In the circumstances, the CESTAT allowed the appeal.

Reasoning of Judgment:-We have considered the submission from both the parties and perused the record, we do not find any justifiable ground to interfere with the order of the CESTAT based on a factual finding and there was no material placed by the Revenue on the allegations of the possible misuse of the goods for unintended purposes by the Sub-Contractors. Secondly, being the beneficial Notification issued in public interest and the project itself being executed fully by the Contractors as per the directions of the Project Implementing Authority, the fact that the machineries were not given directly to the project implementing authority but given to the agency executing the work in fact cannot go against the assessee's claim. Thus ultimately, as the machineries had been put in use by the sub-contractors, who were given the job of execution the claim for exemption cannot be denied. The use of the phrase 'supplied to the projects financed by the said United Nations or an International Organisation and approved by the Government of India' clearly shows that the condition for grant of exemption is supply of the goods towards the project and nothing beyond. The extract of the Notification No.108/95- CE dated 28.08.1995 reads as follows:-

" In exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excises and Salt Act, 1944, (1 of 1944) read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all goods falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the said goods) when supplied to the United Nations or an International organisation for their official use or supplied to the projects financed by the said United National or an international organisation and approved by the Government of India, from the whole of:-

(i) the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944) ; and

(ii) the additional duty of excise leviable thereon under sub-section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) :"

Thus with all the conditions satisfied, the beneficial Notification applies to the case on hand. In the circumstances, we do not find any justification to introduce any condition or read in a restrictive manner. Consequently, the Revenue's appeal fails and hence, the same is dismissed. No costs.

Decision:-Appeal dismissed.

Comment:-The crux of this case is that the benefit of the exemption notification cannot be denied to the assessee on the grounds that the goods were supplied to the project and not to the Project Implementing Authority when the supply of such goods to the said project and its utilisation for the purpose of the said project is not questioned. Being the beneficial Notification issued in public interest and the project itself being executed fully by the Contractors as per the directions of the Project Implementing Authority, the fact that the machineries were not given directly to the project implementing authority but given to the agency executing the work in fact cannot go against the assessee's claim. Thus ultimately, as the machineries had been put in use by the sub-contractors, who were given the job of execution, the claim for exemption cannot be denied.

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