2016 (9) TMI 1126 - AT - Central Excise

Tribunal overturns denial of exemption for goods to power plants under bidding, clarifies tariff classification

The Tribunal allowed the appeal, overturning the Commissioner's order that denied exemption to the appellant for supplying goods to thermal power plants ... Exemption for goods falling under the First Schedule to the Central Excise Tariff when supplied against international competitive bidding - condition of exemption requiring that the goods be exempt from customs duties when imported - classification by reference to project imports (CTH 9801) versus classification by nature under the Central Excise Tariff (e.g. CETH 8544) - construction of exemption notifications and availment of benefit where conditions are fulfilledExemption for goods falling under the First Schedule to the Central Excise Tariff when supplied against international competitive bidding - condition of exemption requiring that the goods be exempt from customs duties when imported - classification by reference to project imports (CTH 9801) versus classification by nature under the Central Excise Tariff (e.g. CETH 8544) - Denial of central excise exemption on the ground that the corresponding customs notification entry shows classification as 9801 rather than the excise classification of the goods was not legally sustainable. - HELD THAT: - The Tribunal examined whether appellants, who supplied electric wires and cables to mega power projects under international competitive bidding and who satisfied the conditions of Entry No. 400 in Customs Notification No. 21/2002-Cus. and of Central Excise Notification No. 6/2006-CE, could be denied exemption because the customs notification records classification as 9801 whereas the goods are classifiable under CETH 8544. The Tribunal relied on earlier decisions dealing with identical facts, observing that heading 9801 appears in the Customs Tariff as a device to identify project imports by use and is not a heading in the Central Excise Tariff. Consequently, goods manufactured in India cannot be classified under 9801 for excise purposes. Where the factual conditions for exemption (supply to mega power projects and fulfillment of the stipulated conditions) are satisfied, the customs entry framed as project imports does not preclude grant of the central excise exemption. The Tribunal therefore held that denial of exemption on the sole ground of the differing classification in the customs notification was unsustainable and followed prior precedents to allow the exemption. [Paras 5, 6]Impugned order set aside; appeal allowed and exemption under Notification No. 6/2006-CE granted to the appellant.Final Conclusion: On the facts, the appellants having satisfied the conditions for supply to mega power projects, denial of central excise exemption solely because the customs notification records classification as 9801 (a project import identifier not found in the Central Excise Tariff) is untenable; the impugned order is set aside and the appeal is allowed. Issues:Classification under Customs Notification No. 21/2002-Cus. vs. Central Excise Tariff, Denial of exemption under Notification No. 6/2006-CE, Interpretation of condition No. 19, Legal sustainability of exemption denial.Analysis:The appeal challenged the order of the Commissioner of Central Excise, Jaipur, concerning the denial of exemption availed by the appellant, engaged in manufacturing electric wires and cables, under Notification No. 6/2006 read with Notification No. 21/2002-Cus. The appellant supplied dutiable items to thermal power plants under international competitive bidding without paying duty. The Revenue objected to the exemption, citing a mismatch in classification under Sl. No. 400 of Notification No. 21/2002-Cus. (9801) and the actual classification of the goods under CETH 8544. The Commissioner confirmed a Central Excise demand of Rs. 3,60,45,825, but did not impose a penalty.The appellant argued that the exemption required goods supplied under international competitive bidding to be exempted from customs duties under the Customs Tariff Act, fulfilled by the appellant as they supplied only to mega power projects with proper certificates. The appellant contended that the classification under customs notification referred to project imports based on usage, not nature, citing precedents like Paramount Communication Ltd. The Revenue contended that since the goods did not fall under Chapter 9801 of the Customs Tariff, the exemption was inapplicable and should be strictly construed.The Tribunal examined previous cases like Sarita Steels and Industries Ltd., Om Metals SPML JV Unit 2, Paramount Communications Limited, and KEI Industries Limited, where it was held that goods required for mega power projects were exempt under the customs notification despite the absence of a corresponding heading in the Central Excise Tariff. The Tribunal found the denial of exemption to the appellant legally unsustainable since the conditions for exemption under Notification No. 6/2006-CE were met, except for the classification discrepancy, which was not available in the Central Excise Tariff. Consequently, the impugned order was set aside, and the appeal was allowed.In conclusion, the Tribunal's decision emphasized the legal sustainability of exemption denial, highlighting the importance of fulfilling conditions for exemption under relevant notifications and interpreting classification discrepancies between customs and excise tariffs. The judgment provided clarity on the applicability of exemptions for goods supplied under international competitive bidding to mega power projects, based on usage and fulfillment of specified conditions, ultimately allowing the appeal and overturning the Commissioner's order.