2016 (7) TMI 1025 - AT - Central Excise

Tribunal affirms exemption for pipes in water supply scheme, emphasizing broad interpretation

The Tribunal upheld the Commissioner's decision, affirming the benefit of the exemption for the respondent's pipes used in the water supply scheme. ... Exemption under Notification No. 6/2002-CE as amended by Notification No. 47/2002 (pipes needed for delivery of water from its source to the plant and from there to the storage facility) - certificate by the Collector/District Magistrate as condition for grant of exemption - CBEC Circular clarification that exemption covers pipes required for obtaining untreated (raw) water from its source to the plant - Pipes needed for delivery of water from its source to the plant - use of casing pipes for tube wells - certificate by the Collector/District Magistrate as condition for exemption - CBEC Circular clarification on pipes for obtaining untreated water - Whether pipes used as casing for tube wells are eligible for exemption under the Notification (as amended) where certificates from the Collector/District Magistrate were produced - HELD THAT: - The respondent produced district-level certificates certifying that the pipes were to be used in water supply schemes for carrying water from source to treatment plant and that the intended use fell within the Notification. The adjudicating authority found on investigation that the pipes were used as casing for tube wells rather than as pipes that physically convey water. The Tribunal held that the wording of the Notification must be construed purposively so as not to frustrate its object. The CBEC Circular expressly clarifies that exemption extends to pipes required for obtaining untreated (raw) water from its source to the plant. Casing pipes, though not themselves conduits of water, are necessary for obtaining water from wells and therefore fall within the phrase 'needed for delivery of water from its source to the plant.' Applying the purposive interpretation supported by the Circular and having regard to the statutory condition that a certificate from the Collector/District Magistrate was produced, the Tribunal concluded that the exemption could not be denied merely because the pipes served as casing rather than as carriers of water. [Paras 6, 7, 8]The benefit of the exemption under the Notification was held to be available to the respondent in respect of the casing pipes; the Revenue's appeal was rejected.Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order granting exemption under the Notification to the pipes supplied by the assessee (covered by district certificates), holding that casing pipes needed to obtain raw water fall within 'pipes needed for delivery of water from its source to the plant,' and dismissed the Revenue appeal. Issues:Interpretation of Notification No. 6/2002-CE dated 1/3/2002 (Serial No. 196A) regarding exemption for pipes used in water supply schemes.Analysis:The dispute in this case revolves around the interpretation of Notification No. 6/2002-CE dated 1/3/2002 (Serial No. 196A) regarding the benefit of exemption for certain pipes used in water supply schemes. The respondent had manufactured and cleared M.S. Pipes to the department of PHED for drinking water in various districts of Rajasthan based on certificates issued by the Collector and District Magistrate. The Revenue contended that the pipes were used as Casing pipes for water wells and not for delivering water, thus denying the exemption. The Original Adjudicating Authority upheld this view, but the Commissioner (Appeals) allowed the benefit of the notification, stating that the pipes were indeed used for delivering water from its source to the plant.In the appeal, the Revenue challenged the Commissioner's decision, arguing that the exemption is only applicable to pipes used for carrying water from the source to the treatment plant and storage facility. The Revenue contended that since the respondent's pipes were used as Casing pipes for water wells, the benefit of the exemption should not be extended to them.However, the respondent cited a CBEC Circular clarifying that the exemption covers pipes needed to obtain untreated water from the source to the plant and supply treated water to the storage facility. The Circular specified that the concession does not apply to pipes supplying treated water from storage to consumption. The respondent presented certificates from the Collector and District Magistrate certifying the intended use of the pipes in accordance with the notification.After investigating the use of the pipes, it was found that they were primarily used as Casing pipes for tube wells. Despite not physically carrying water, the pipes were deemed necessary for delivering water from its source to the plant. The Tribunal interpreted the notification to avoid frustrating its purpose and upheld the Commissioner's decision, emphasizing that denying the benefit based on the physical transportation of water would defeat the notification's objective of aiding water treatment plants.Therefore, the Tribunal upheld the Commissioner's order, rejecting the Revenue's appeal and affirming the benefit of the exemption for the respondent's pipes used in the water supply scheme.