Exemption for intended use in water supply schemes upheld; departmental challenge to competent authority's certificate rejected.

Exemption under Notification Nos. 6/2002-CE and 6/2006-CE remained available for pipes cleared for water supply schemes where the competent District Collector certified the intended use and the prescribed certification procedure was followed. The Tribunal held that the Department could not deny the benefit merely by relying on an Executive Engineer's letter or by reappreciating the project's factual suitability, because the notifications required clearance for intended use, not actual ultimate use in every case. The exemption conditions were satisfied, so the demand was unsustainable and the penalty could not survive.

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Issues: Whether exemption under Notification No. 6/2002-CE and Notification No. 6/2006-CE was available for pipes cleared for water supply schemes on the strength of certificates issued by the District Collector, and whether the demand and penalty could be sustained.

Analysis: The exemption notifications required clearance of goods for the intended use specified therein and compliance with the prescribed certification procedure. The Revenue sought to deny the benefit on the ground that some projects did not have a water treatment plant and that the certificate could not override the actual project position. The Tribunal held that the department could not disregard the certificate issued by the competent public authority merely on the basis of a letter from an Executive Engineer. Relying on the principle that exemption language referring to goods for use means intended for use, and following earlier decisions on identical facts, the Tribunal found that the conditions of the notifications were satisfied.

Conclusion: The assessee was eligible for the exemption. The demand was unsustainable and the penalty could not survive.

Final Conclusion: The impugned order was set aside and the appeals were allowed.

Ratio Decidendi: Where an exemption notification requires goods to be cleared for intended use and the competent public authority certifies such intended use, the department cannot deny the exemption merely by reappreciating the factual suitability of the project or by disregarding the certificate without contrary legal basis.

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