Exemption for desalination plants supplying potable water was upheld under the water-treatment notification.

Desalination plants cleared to the Ministry of Defence were treated as eligible for exemption under Notification No. 6/2002-C.E., as amended, because the exemption covered machinery, apparatus, auxiliary equipment and parts required for water treatment plants, and the explanation expressly brought desalination plants within that category. The Board's circular supported extension of the benefit even where the full plant was supplied, and the competent district authority's certificate confirmed that the goods were intended for potable water supply and met the prescribed condition. An interpretation that denied relief on the basis of a distinction between imported and indigenously manufactured plants was found inconsistent with the object of the exemption, so the duty demand, interest and penalty could not survive.

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Issues: Whether desalination plants cleared to the Ministry of Defence were entitled to exemption under Notification No. 6/2002-C.E. as amended by Notification No. 47/2002-C.E., and, if so, whether the duty demand, interest and penalty could be sustained.

Analysis: The exemption entry covered all items of machinery, including instruments, apparatus, appliances, auxiliary equipment and their components/parts required for setting up water treatment plants, and the explanation expressly included desalination plants within the meaning of water treatment plants. The Board's circular clarified that the benefit would extend even where the full plant was supplied, and the certificate issued by the competent district authority showed that the goods were intended for potable water supply and satisfied the prescribed condition. The interpretation adopted by the adjudicating authority would defeat the object of the exemption and create an unwarranted distinction between imported and indigenously manufactured plants.

Conclusion: The desalination plants were eligible for exemption under the notification as amended, and the duty demand, interest and penalty could not survive.

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