CESTAT Bangalore upholds demand for denial of benefit under Notification No.10/1997 due to indirect supply chain.

The Appellate Tribunal CESTAT Bangalore confirmed a demand against the appellants for denial of the benefit of Notification No.10/1997 due to supplying goods to contractors instead of National Aeronautics Ltd. The Revenue objected to the indirect supply chain and insufficient certification. The appellants argued they had paid a portion of the dues under CENVAT Credit Rules, leading the Tribunal to waive the predeposit requirement for the remaining balance. The stay petition was disposed of accordingly.

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Issues: Denial of benefit of Notification No.10/1997 for goods supplied to contractors instead of National Aeronautics Ltd. (NAL); Requirement of certificate signed by Director for exemption; Confirmation of demand; Consideration of CENVAT credit payment in lieu of balance dues.

In this judgment by the Appellate Tribunal CESTAT Bangalore, the primary issue was the denial of the benefit of Notification No.10/1997 to the appellants for goods supplied to contractors working with National Aeronautics Ltd. (NAL) instead of directly to NAL itself. The Revenue contended that the benefit of the notification could not be extended due to this indirect supply chain. Another objection raised was the non-compliance with the condition of the notification, which required a certificate signed by the Director confirming the use of items in research applications. The appellants had provided a certificate signed by the Senior Deputy Secretary to the Director, which was deemed insufficient by the Revenue, leading to the initiation of proceedings and the confirmation of a demand amounting to Rs. 2,01,880.

Furthermore, the appellants argued that they had already paid 5% of the value of the goods as per Rule 6(3) of the CENVAT Credit Rules by treating the goods as exempt and availing CENVAT credit for common inputs, resulting in a payment of approximately Rs. 1.22 lakhs. Considering this payment as sufficient, the Tribunal decided to dispense with the requirement of predeposit for the balance dues, interest, and penalty. As a result, the stay petition was disposed of in the above manner, with the order being pronounced and dictated in open court.

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