Sub-contractors supplying goods to main contractors in mega power projects eligible for Notification 6/2006-CE exemption benefits

CESTAT Chennai allowed the appeal in a case involving exemption under Notification No.6/2006-CE for MS Rebars supplied to a mega power project. The department denied exemption claiming the appellant sub-contractor was ineligible as they didn't participate in international competitive bidding and goods didn't fall under Chapter Heading 98.01. The Tribunal held that sub-contractors supplying goods to main contractors who participated in international competitive bidding are eligible for exemption, citing Board Circular dated 10.07.2014 and precedent cases. The Tribunal ruled that goods intended for mega power projects are covered under CTH 98.01 regardless of individual classification, making them eligible for exemption benefits.

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Issues Involved:

1. Eligibility for exemption under Notification No. 6/2006-CE dated 01.03.2006.
2. Applicability of International Competitive Bidding (ICB) conditions.
3. Classification of goods under Chapter Heading 98.01 of the Customs Tariff Act.
4. Validity of demand for excess quantity supplied beyond Project Authority Certificate.
5. Limitation and suppression of facts.

Summary:

1. Eligibility for exemption under Notification No. 6/2006-CE dated 01.03.2006:

The appellant claimed exemption for MS Rebars supplied for a Mega Power Project under Sl.No.91 of Notification No. 6/2006-CE dated 01.03.2006. The Original authority denied the exemption, stating the appellant did not participate in the International Competitive Bidding and the goods did not fall under Chapter heading 98.01 of the Customs Tariff Act.

2. Applicability of International Competitive Bidding (ICB) conditions:

The Tribunal clarified that sub-contractors supplying goods to a main contractor who won the ICB contract are eligible for exemption. This was supported by the CBEC Circular dated 10.07.2014 and judgments in cases like Kent Introl Pvt Ltd Vs CCE, Nashik and Toshniwal Indus Pvt Ltd Vs CCE, Jaipur II.

3. Classification of goods under Chapter Heading 98.01 of the Customs Tariff Act:

The Tribunal found that goods supplied for setting up a Mega Power Project are covered under Chapter Heading 98.01, facilitating project imports under a common heading with concessional duty rates. The Tribunal referenced cases like Sarita Steels and Industries Limited Vs CCE, Vizag and OM Metals Vs CCE & ST, Jaipur to support this interpretation.

4. Validity of demand for excess quantity supplied beyond Project Authority Certificate:

The Tribunal noted that the demand for duty on excess quantity supplied, as recorded in the amended Project Authority Certificate, was beyond the scope of the Show Cause Notice (SCN). The SCN did not allege that excess quantity was ineligible for exemption, and thus, the demand was invalid.

5. Limitation and suppression of facts:

The Tribunal found that the appellant had informed the Department about the supply of MS Rebars for the Mega Power Project and had submitted all relevant documents. The Department's audits did not raise any objections until much later, negating allegations of willful misstatement or suppression of facts. Therefore, the extended period for demand was not justified.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeal, granting the appellant the benefit of exemption under Notification No. 6/2006-CE dated 01.03.2006, with consequential reliefs.

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