Sub-contractor supplies for a mega power project can qualify for exemption under international competitive bidding conditions.

Goods supplied by a sub-contractor for a mega power project were treated as eligible for exemption under Notification No. 6/2006-C.E. because the supplies were made against an international competitive bidding contract awarded to the main contractor and were required for setting up the project. The exemption was stated to extend to goods that would also be exempt from customs duty and additional duty if imported into India. The fact that the supplier itself was not the bidder did not, on the stated reasoning, defeat the exemption where the goods were routed through the main contractor and reached the project site under the subcontracting arrangement. On that basis, the demand and penalties were considered unsustainable.

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Issues: Whether goods supplied by a sub-contractor for a mega power project were entitled to exemption under Notification No. 6/2006-C.E. when the main contractor had participated in international competitive bidding.

Analysis: The goods supplied were angles, channels and beams cleared for use in a mega power project under a contract awarded to the main contractor. The exemption under Notification No. 6/2006-C.E. applied to all goods supplied against international competitive bidding, subject to the condition that the goods would be exempt from customs duty and additional duty if imported into India. The goods were found to be goods required for setting up the mega power project under the relevant customs notification. The fact that the assessee itself was not the bidder did not defeat the exemption, because the supplies were made through the main contractor and reached the project site through the subcontracting arrangement.

Conclusion: The assessee was eligible for the exemption and the demand and penalties were unsustainable.

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