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Issues: Whether mandatory spares supplied along with circuit breakers against international competitive bidding were covered by the exemption and consequently exempt from reversal of CENVAT credit or payment of an amount under the CENVAT Credit Rules, 2004.
Analysis: The goods were supplied under international competitive bidding and exemption under Notification No. 6/2006 was availed for both the main equipment and the mandatory spares. Rule 6(6)(vii) carved out an exception for supplies made against international competitive bidding. Since the purchase orders and bids included the mandatory spares as part of the supply obligation, those spares were also treated as supplied against international competitive bidding. In such circumstances, the demand to reverse credit or pay 10% of the value of the spares was not justified.
Conclusion: The demand for reversal of credit or payment of an amount on the mandatory spares was unsustainable and was set aside in favour of the assessee.
Final Conclusion: The exemption applicable to supplies made against international competitive bidding protected the mandatory spares from CENVAT credit reversal, and the appeals succeeded.
Ratio Decidendi: Where goods, including mandatory spares, are supplied as part of an international competitive bidding contract and fall within the relevant exemption, Rule 6 of the CENVAT Credit Rules, 2004 does not require reversal of credit or payment of an amount on those goods.
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