Procedure for obtaining exemption from Excise /Customs duty on inputs acquired for supplying to a Power project client

[Sandhya Srinivas]

We supply our product to clients like BHEL executing mega power projects. The purchase orders are given on a Excise Exempt basis and Project Authority Certificate (PAC) is provided to us with our name as a supplier to enable us to invoice the client without Excise.

How do we obtain the same benefit ( excise/customs exemption) when we in turn procure inputs( both domestic and imported) from our suppliers?.  Do we need to ask our client to include our supplier names in the original PAC that they provide or a seperate PAC has to be obtained and if so by whom or do we need to approach our Excise Jurisdiction for the same. Kindly clarify.

 

[mehta pradip]

No exemption  from payment of Ex. Duty is available as per order reported at 2011(272)ELT 79(Tri-Del) in the matter bet. Sangam Structurals Ltd V/S Comm. of C.Ex (Allahabad) (2011 (3) TMI 1304 - CESTAT, NEW DELHI)

[mehta pradip]

You have to pay excise duty on finished goods supplied to bhel under mega power project scheme as per order reported at SANGAM STRUCTURALS LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD 2011(272)ELT 79 (Tri-Del).The exemption is available to Bhel if they manufacture and supply and not to secondary supplier like you.

[Mahir S]

Exemption from payment of C.Excise duty is available.

[Mahir S]

Exemption from payment of Central Excise Duty is available to both i,e. your firm as well to BHEL.

No need for separate PAC is required for you.

 

[Sandhya Srinivas]

Mr. Naveed

 

Is there a notification # or a case law in Excisewhich provides clarity on the exemption being available to sub suppliers as stated by you for Input credit.

 

Thanks

Sandhya

[Mahir S]

Kindly clarify, whether the mega power projects under duty exemption are provided to you under notification no. 6/2002 CE as amended or under Notification No. 108/95 CE as amended, or any other such Notification.

[Mahir S]

Following case laws are in your favour. Let me know if whole copy of the judgement is required.

1. CST LIMITED & ANR. Versus CC & CE, HYDERABAD-I ( 2008 (85) RLT 298 (CESTAT-Ban.)

2 AUTOMATIC ELECTRIC LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI  (2004 (178) E.L.T. 524 (Tri. - Mumbai)

3.CATERPILLAR INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., PONDICHERRY (2005 (185) E.L.T. 430 (Tri. - Del.)

4. IBM INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., PONDICHERRY  {(2008 (223) E.L.T. 429 (Tri. - Chennai)}

[Sandhya Srinivas]

PAC issued under Notification no 6/2006 CE amended by 35/2011 . since we have to invoice BHEL without Excise can we take input credit on raw materials and components purchased to manufacture the finished goods to be supplied to BHEL who is the contractor for the power project. This  input credit will be adjusted against other excise liabilties on other despatches we have with Excise to other clients.

 

 

 

[Mahir S]

Yes, of course, you can surely avail canvat credit on raw materials and components purchased to manufacture the finished goods to be supplied to BHEL who is the contractor for the power project.

This  input credit can be utilized against other excise liabilties on other despatches.

Such provision is already available in Central Excise Law.

[Sandhya Srinivas]

Thank you for the clarification provided.

[Mahir S]

Kind attention is drawn to folllowing rule which applies directly to your case :-

Rule 6 of  Cenvat Credit Rule, 2004 - ^[Obligation of a manufacturer or producer of final products and a provider of taxable service.

(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-

           [(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied,—

                       (a) against International Competitive Bidding; or

                       (b) to a power project from which power supply has been tied up through tariff based competitive bidding; or

                       (c) to a power project awarded to a developer through tariff based competitive bidding, in terms of notification No. 6/2006-CE dated the 1st March, 2006.]

                          

[Mahir S]

The following case law will also make the issue more clearer. Let me know if there is any further clarification is required in the matter.

 

 CESTAT AHMEDABAD( Citation: 2008 (230) E.L.T. 257 (Tri. - Ahmd.))

SANGHI INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., RAJKOT

 

[NEERAJ KUMAR, RANCHI]

yes Ms Sandhya,

You need to include your supplier's name in the certificate issued in this purpose by the project authority.

 

[Ramakrishna M]

Hi all,

in the recent past MOF has extended excise exemption even for Provisionally approved Mega Power projects subject to execution a Bank Guarantee for Excise duty amount and finally such BG shall be redeemed after the final approval of Mega power status with in 36 months.

In this process initially the goods required for projection execution has to be certified by Central Electricity Authority (CEA) thro a PAC and in turn the project developer shall time to time issue such PAC to his vendors for supply of P&M without payment of ED based on BG submitted by the developer to the jurisdictional Excise Authorities as per CBEC  Circular No. 963/06/2012-CX  for all provisional cases. 

A) Would like to understand while issuing PAC by CEA is it required to mention the supplier name also along with list of euqipments to be required for the project, this is because it happens the list of vendors  who supply  the each item / goods would not be finalized at the time  of making application to CEA for PAC.  

B) Can the project owner / developer based on the PAC issued by CEA further issue PAC, after identifying the suppliers and to their sub-suppliers for supply of goods with out payment of ED. 

 

Regards

Ramakrishna / 8978386060

 

[Guest]

Mr. Naveed S.

I would like to know whether the refund/rebate of Central Excise Duty paid on Inputs used in the manufacture of Final product supplied to ADB Financed Project under Nfn. No. 108/95 is allowed or not in terms of Para 4.1.3, 8.2.4, 8.3.1.(c) and (d) of FTP.

The problem is there is CENVAT accumulated against the supplies of Capital Goods i.e. Chapter 8504330 (Transformer) made to Power Project financed by ADB under Nfn. No. 108/95, and there is no chance to utlized the same in near future. Is there any procedure available to refund/rebate or otherwise the central excise duty accumalted on account of purchase of inputs.

AI Summary

Power Project Suppliers Debate Excise Duty Exemptions, CENVAT Credit, and Refunds; Notification 6/2006 CE Discussed A company supplying products to power projects like BHEL seeks guidance on obtaining excise/customs duty exemptions for inputs procured domestically and internationally. The discussion reveals differing opinions: some assert no exemption is available for secondary suppliers, while others argue that exemptions can be utilized under specific notifications like 6/2006 CE. It is suggested that suppliers should be named in the Project Authority Certificate (PAC) for exemption eligibility. The conversation also touches on the possibility of availing CENVAT credit for inputs used in manufacturing goods supplied to such projects and the procedures for refunding accumulated excise duties.