Manufacturer wins exemption for BCPM supplied to Women Co-operatives under ICDS scheme despite indirect delivery

CESTAT Chennai allowed the appeal filed by the manufacturer who supplied BCPM (food preparation) to Women Industrial Co-Operative Societies under the ICDS scheme. The Department denied exemption under Notification 12/2012-CE, claiming BCPM wasn't directly supplied to beneficiaries. The Tribunal held that BCPM was integral to the scheme, ultimately reaching beneficiaries as CWF after adding wheat flour at WCS. The manufacturer fulfilled all notification conditions by providing quarterly certificates. The Tribunal found no suppression of facts warranting extended limitation period, as all documents were submitted to audit. Central excise duty demand with interest and penalty was set aside. Service tax demand dropping was upheld.

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Issues Involved:

1. Alleged wrong availment of Notification No. 12/2012-CE dated 17.03.2012 for food preparations.
2. Non-payment of Service Tax on standalone services provided to Women Industrial Co-Operative Societies (WCS).

Summary:

1. Alleged Wrong Availment of Notification No. 12/2012-CE:

The Appellant Assessee, M/s. Christy Friedgram Industries, availed exemption from Central Excise duty u/s Notification No. 12/2012-CE for products Complementary Weaning Foods (CWF) and Blend of Critical Processed Materials (BCPM). The Department denied the exemption for BCPM on the ground that it was supplied to WCS and not directly for free distribution. The Tribunal found that BCPM is an integral part of CWF, which is distributed free to beneficiaries. The certificates from the competent authority confirmed that BCPM was used in CWF distributed to economically weaker sections. The Tribunal held that the Appellant fulfilled all conditions of the Notification and was entitled to the exemption.

2. Non-payment of Service Tax:

The Department contended that the Appellant provided standalone services to WCS, which should attract Service Tax. However, the Tribunal observed that the services were part of a composite contract for the supply of BCPM, and no separate consideration was received for these services. The Tribunal upheld the Adjudicating Authority's decision to drop the Service Tax demand, relying on the decision of the Hon'ble Supreme Court in the case of BSNL and the clarification in the Education Guide issued by CBEC.

Other Findings:

The Tribunal also found that the extended period of limitation was not invocable as there was no suppression of facts by the Appellant. The demand of duty along with interest and penalty confirmed in the impugned order was set aside on merits and on the ground of limitation. The appeal filed by the Department was dismissed.

Conclusion:

The appeal filed by the Appellant Assessee was allowed, and the appeal filed by the Department was dismissed. The Tribunal held that the Appellant was entitled to the benefit of the exemption Notification No. 12/2012-CE for BCPM and that no Service Tax was payable on the alleged standalone services provided to WCS.

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