High Court affirms Tribunal decision on customs & excise exemption criteria, clarifies scope of supply, upholds interpretation

Commissioner of Central Excise, Alwar Versus M/s. Kamdhenu Ispat Ltd.

Commissioner of Central Excise, Alwar Versus M/s. Kamdhenu Ispat Ltd. - 2017 (348) E.L.T. 64 (Raj.) Issues Involved:

1. Whether the Tribunal correctly concluded that all conditions for exemption were satisfied despite the eligibility criteria not being fulfilled.
2. Whether the term 'supplied to the projects' can include 'supply to other parties' who use the goods for the project.
3. Whether the exemption is available to goods supplied to other parties, especially when such goods have a lifespan and utility beyond the project's duration.

Issue-Wise Detailed Analysis:

1. Tribunal's Conclusion on Conditions for Exemption:

The Department challenged the order of the Customs, Excise, and Service Tax Appellate Tribunal, which had affirmed the Commissioner (Appeals)'s decision. The appellant's counsel argued that the exemption conditions were not met as per the circular dated 28.08.1995, referencing the case of Dee Development Engineers Ltd. vs. Union of India, where the Punjab & Haryana High Court held that the exemption could not be claimed by the assessee because the certificate was issued in favor of another entity, not the assessee. The High Court of Rajasthan, however, found that the Tribunal had rightly concluded that the necessary certificates were produced and there was no allegation of diversion of the material supplied. The Tribunal's decision was supported by the Madras High Court's ruling in Commissioner of C.Ex., Pondicherry vs. Caterpillar India Pvt. Ltd., which emphasized that the beneficial notification should be interpreted to support the project's execution.

2. Interpretation of 'Supplied to the Projects':

The appellant's counsel contended that the term 'supplied to the projects' should not be expanded to include supplies to other parties. However, the Madras High Court in the Caterpillar India Pvt. Ltd. case clarified that the supply to subcontractors executing the project did not negate the exemption. The High Court of Rajasthan agreed, noting that the focus of the notification was on the supply to the project itself and not necessarily to the project implementing authority directly. The Tribunal found no issue with the respondent supplying materials to entities mentioned in the certificates, as long as the goods were used for the approved project.

3. Exemption for Goods with Extended Lifespan and Utility:

The appellant raised concerns that goods with a lifespan beyond the project's duration might be used for purposes not covered by the exemption. The High Court referred to the Madras High Court's decision, which dismissed similar concerns, stating that the exemption applied as long as the goods were supplied for the project's execution. The Tribunal and Commissioner (Appeals) found no evidence of misuse or diversion of the goods, and thus, the exemption was applicable.

Additional Observations:

The High Court emphasized that strict interpretation of exemption notifications should not overlook the notification's purpose and wording. Citing several Supreme Court decisions, the Court reiterated that exemption cannot be denied by imposing conditions not explicitly stated in the notification. The Tribunal and Commissioner (Appeals) had correctly interpreted the notification, considering the certificates and the actual use of the supplied goods.

Conclusion:

The High Court of Rajasthan dismissed the Department's appeal, upholding the Tribunal's decision. It concluded that the conditions for exemption were met, the term 'supplied to the projects' included supplies to subcontractors, and there was no misuse of the goods. The High Court found no substantial question of law warranting further consideration, affirming the Tribunal's and Commissioner (Appeals)'s interpretation of the exemption notification.