Notification exemption for water supply pipes upheld, and Rule 26 penalty set aside after duty demand failed.

CESTAT New Delhi held that pipes procured for a rural agricultural water supply scheme qualified for exemption under Notification No. 3/2004-C.E. because the appellant had obtained the requisite certificate from the District Collector and the scheme materials showed use of the pipes as part of the water delivery and storage arrangement. The certificate issued after examination of the scheme was accepted as sufficient to extend the notification benefit. As the duty demand itself failed, the penalty under Rule 26 for dealing with goods alleged to be liable for confiscation was also unsustainable and was set aside.

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Issues: Whether the appellant was entitled to the benefit of Notification No. 3/2004-C.E. for procurement of pipes without payment of duty for a rural agricultural water supply scheme, and whether the penalty imposed under Rule 26 was sustainable.

Analysis: The notification exempts pipes required for delivery of water from its source to the plant and from there to the storage facility, on production of a certificate issued by the District Collector or other specified local authority. The appellant had obtained the necessary certificate from the District Collector for the water supply scheme, and the scheme materials indicated that the pipes were used as part of the supply arrangement, including storage in water chambers. The certificate issued after considering the scheme was treated as sufficient to extend the benefit of the notification. Since the foundation of the duty demand failed, the penalty imposed for dealing with excisable goods liable for confiscation was also found unsustainable.

Conclusion: The appellant was held entitled to the notification benefit, and the penalty was set aside.

Final Conclusion: The impugned order was quashed and the appeal succeeded with consequential relief.

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