TaxTMI 
TaxTMI 
2024 (4) TMI 61
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....ed 05.08.2021. As both the appeals have arisen out of the same impugned order dated 28.12.2022 and also similar issues involved, these appeals are taken up together for disposal by this common order. 2.1 The issue involved in the Appeal No. E/40118/2023 filed by the Appellant Assessee involves the alleged wrong availment of Notification No. 12/2012-CE dated 17.03.2012 in relation to food preparation supplied to Women Industrial Co-Operative Societies intended for free distribution to the economically weaker sections of the society and the Appeal No. ST/40150/2023 filed by the Commissioner of Central Excise, Salem involves non-payment of Service Tax on the alleged standalone services provided by the Respondent Assessee to the Women Industrial Co-Operative Societies in the manufacture of Complementary Weaning Foods. 2.2 Brief facts of the case, as ascertained from the appellate records are that M/s. Christy Friedgram Industries, Namakkal, is involved in manufacturing food preparations namely "Complementary Weaning Foods" (hereinafter referred as CWF) and "Blend of Critical Processed Materials" (herein after referred as BCPM), falling under heading No. 1901 of CETA, 1985. Both t....
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....the Appellant Assessee contended that they are entitled for the benefit of the exemption Notification No. 12/2012-CE dated 17.03.2012 for both the products. 2.4 The Department denied the benefit of the exemption contained in the impugned Notification to BCPM on the ground that the Appellant Assessee did not supply the same directly for free distribution to the economically weaker sections of the society and had supplied the BCPM only to WCS for further manufacture of Complementary Weaning Food. The WCF manufactured by the Appellant Assessee and packed in 1kg and 2kg bags alone was directly distributed to the economically weaker sections of the society and hence only the WCF directly supplied to ICDS was entitled for such exemption. The Department also alleged that the price of BCPM did not include the freight charges which was subjected to appropriate service tax, in spite of the place of removal being the WCS, should be included in the transactional value of BCPM. 2.5 Consequently, the Show Cause Notice No. 03/2021-CEX & ST dated 05.08.2021 was issued to the Appellant Assessee demanding central excise duty of Rs.47,16,57,863/- on the transaction value determined under sectio....
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....ad has explained in detail about the background for supply of the product BCPM to the WCS. They submit that an expert committee has been constituted to evaluate, formulate and prescribe the procedure to implement the scheme of supply of nutritional food supplement to the weaker sections of the society. The expert committee introduced the subject product with the nomenclature BCPM along with the technical specifications and also suggested that BCPM shall be procured/purchased from competent, eligible Private Enterprises like the Appellant Assessee. The Committee advised that the WCS would add roasted wheat flour with BCPM in the ratio of BCPM - 58% and Wheat flour - 42%. The technical specification suggested by the Committee would clearly show that essential ingredients namely Malted Ragi which contributes amylase activity which is instrumental for digestion and easy absorption of nutrients and vitamin pre-mix, which contributes micronutrients, are contained only in BCPM. Thus, the committee assigned significance to BCPM. The technical specification for BCPM and CWF recommended by the Expert committee furnished by the Appellant Assessee in support of their contention that it contain....
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....ing technical expertise in Nutritional Food, Public Health and Preventive Medicine and the opinion of the Expert Committee was submitted before the Court. As directed by the Hon'ble Madras High Court, an order (Ms) No. 146 dated 16.10.2006 incorporating the recommendation of the Expert Committee was issued by the Government of Tamilnadu. 4.3 The Expert committee visited all the premises of Women Development Industrial Co-Operative Societies and studied the process undertaken by the WCS, the infrastructure and the machinery installed there in. The defects in WCS were pointed out and the suggestions there upon to improve the quality of CWF to be supplied to the beneficiaries were also given by the Expert Committee. 4.4 The main suggestions of the Expert Committee relevant to the issue are furnished below:- a. Primary Defects in the Women Development Industrial Co-Operative Societies:- i. The production premises, Raw material, and finished product godowns are either not separately maintained or inadequate and also do not comply with IIS:2491-1998 FOOD HYGIENE-GENERAL PRINCIPLES-CODE OF PRACTICE as required for the manufacture of food items. ii. The soc....
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....No. Blend of Critical Processed Materials containing amylase Activity Formulation Ingredients For 100 Kgs 1 Wheat Flour 6.00 2 Roasted Ragi Flour 10.50 3 Fortified Palm Oil 8.70 4 Malted Ragi Flour 8.50 5 Full Fat Soya Flour 18.00 6 Jaggery 46.50 7 Minerals(Iron, Calcium) and Vitamins Pre-mix (Vitamin A&C, Thiamine, Riboflavin, Niacin, Folic Acid) 1.80 Specification for CWF : Roasted wheat flour : 42% and BCPM: 58% 4.5 Further, the Ld. Advocate submitted that the expert committee created a new product with nomenclature "Blend of Critical Processed Materials" containing the ingredients as per Technical Specification recommended therein. As the societies did not possess sufficient infrastructure and machinery to process raw materials and finished products especially for the manufacture of Malted Ragi, which is instrumental to contribute amylase activity, it was recommended to procure/purchase BCPM from qualified, competent and eligible private enterprises like the Appellant Assessee. Thus, they submit that the BCPM is a food preparation containing the essential ingredients classifiable under Chapt....
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.... to ICDS by the Appellant Assessee under a separate contract/agreement. BCPM has been introduced as a new product by the Expert Committee. Hence BCPM shall be considered as food preparation packed in unit container and intended for free distribution to the beneficiaries through WCS and Anganwadi Centers. The Appellant Assessee had also submitted the certificate duly issued by the competent authority to the effect that BCPM purchased from the Appellant Assessee has been used in the preparation of CWF, packed in 1kg and 2kg bags and distributed to the beneficiaries free of cost, to the jurisdictional Central Excise Officers, as per the condition No.5 stipulated in the said Notification No. 12/2012-CE dated 17.03.2012, once in a quarter. Thus, they contended that it has been proved beyond doubt that BCPM has been consumed ultimately by the beneficiaries under the ICDS scheme as mandated in the above said Notification. 5. Further, the contention of the Ld. counsel is that in order to avail the benefit of the notification the food preparation has to be supplied to the beneficiaries of a programme duly approved by the Central Government or State Government'. The necessity to supply th....
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....eration of steam is so integrally related to the ultimate manufacture of fertilizer that it must be held to be a necessary part of the manufacturing process. The mere fact that in the process, L.S.H.S/F.O. gets burnt up, is of no significance, as long as the generation of steam for which it is utilised, is an essential part of the process of manufacture. I also hold that so much of the L.S.H.S./F.O. as is utilised for the purpose of manufacture of ammonia which is further processed, culminating in the manufacture of fertilizers, attract the benefit of exemption under the subject notification. However, so much of the L.S.H.S./F.O. as is utilised for the purpose of manufacture of Ammonia sold as such in the open market, will not qualify for total exemption under the subject notification and must be dealt with under the relevant notification". 7.1 The Ld. counsel for the Appellant Assessee has further contended that the term "intended for" having wide connotation has been narrowly interpreted by the Adjudicating Authority by importing the term "directly" into the ambit of the notification. The Adjudicating Authority ought to have interpreted the term "intended for" in the light of ....
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....ary (TRU-1), CBEC, stated that during the 21st Meeting of the Council held on 9 September, 2017, the Council had requested the Fitment Committee to examine two issues - nutritious diet (pusthaahar) distributed under the Integrated Child Development Scheme (ICDS) and all goods falling under Heading 6802(other than those of marble and granite or those which attract 12% rate of tax) afresh. He stated that in addition, the Fitment Committee examined a number of other issues referred to it by the States of Gujarat, Maharashtra and Uttar Pradesh and the recommendations on these issues were also presented before the Council for consideration. A record of discussion on these issues is as below: "28.1. Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government (SI. No. 1): The Joint Secretary, TRU-1, CBEC informed that recommendation of the Fitment Committee was to reduce the rate of tax on food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme dul....
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....hether it is CWF or BCPM, as both the products are ultimately supplied to the weaker sections of the society. By narrowly interpreting the notification, the very purpose of the notification has been defeated. 10.1 The Ld. counsel has submitted that the Social Welfare and Nutritious Meal Programme Department, Secretariat, Chennai vide Letter No. 14077/SW7(1)/2020-3 dated 17.02.2021 communicated the clarification issued by the Commercial Tax Department which is reproduced below:- "c) As per the agreement entered into, the successful L-1 Tenderer i.e.M/s. Christy Friedgram Industry ,Thiruchengode supplies "Blend of Critical Processed Materials" to the 25 WDICS in the state. The WDICS in turn manufacture Complementary Weaning Food and supply it to ICDS for free distribution to the beneficiaries. Hence, the entire supply chain should be treated as part and parcel of the scheme without subjecting to differential levy of tax, and taxed uniformly at 5%-vide Central Notification No.39/2017-Central Tax (Rate) (CT&R Department Notification No.II(2)/CTR/868(f-1)/2017 dated 18-10-2017. d) It is mentioned that the present reduced rate of tax at 5% vide Central Notification N....
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....for supplying nutritional food supplements to Children, Pregnant and Lactating women free of cost. The Government of Tamilnadu implemented the scheme formulating the technical specifications for food supplements with the name Complementary Weaning Food (CWF) containing amylase activity. Tamilnadu Government had floated 25 women Co-Operative Societies for the manufacture and supply of CWF to the beneficiaries. For implementing the scheme, Department of ICDS was nominated as the Nodal Agency. When the supply of CWF was found qualitatively defective, as per the direction of Hon'ble Madras High Court, an Expert Committee comprising of Experts in Nutritious food preparations was constituted to provide technical opinion for successful implementation of the scheme and to supply qualitative CWF to the beneficiaries. The Expert Committee visited those 25 WCS and studied the process of manufacture of CWF, inspected the infrastructure/machinery/equipments available in those societies for storing the raw materials, finished goods and processing the materials and found that the WCS did not have sufficient godowns/store rooms for storing raw materials. WCS did not have sufficient equipment/machi....
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....aid product has not been supplied directly to Anganwadis for free distribution to the Societies. Thus, the main issue to be examined here is whether the product "BCPM" manufactured by the Appellant Assessee and supplied to the WCS is entitled for the exemption contained in the Notification No. 12/2012. Relevant portion of the Notification No. 12/2012-CE dated 17.03.2012:- Sl. No. Tariff item, sub-heading, heading or Chapter Description of Goods Condition (1) (2) (3) 4 27 1901 Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programmme duly approved by the Central Government or any State Government. 5 5. If the manufacturer of the food preparations produces a certificate from an officer not below the rank of the Deputy Secretary to the Government of India or not below the rank of the Deputy Secretary to the State Government concerned to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concern....
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....0 6 Jaggery 46.50 7 Minerals(Iron, Calcium) and Vitamins Pre- mix (Vitamin A&C, Thiamine, Riboflavin, Niacin, Folic Acid) 1.80 b. Complementary Weaning Food would contain the following contents:- Roasted wheat flour : 42% and Blend of Critical Processed Materials : 58% 14.4 From the above, we observe that CWF is the product intended to be supplied to the beneficiaries under the ICDS scheme. BCPM, as a separate product would not ordinarily come into existence during the course of manufacture of CWF. BCPM, as a separate product, has been introduced only by the Expert Committee suggesting the Technical Specification for BCPM. It is observed that all the essential ingredients such as Malted Ragi and vitamin premix which are instrumental to contribute amylase activity and micronutrients are contained only in BCPM. CWF has come into existence by mere addition of wheat flour in the ratio of 58:42 in the premises of WCS. The addition of roasted wheat flour with the BCPM does not transform it into a new product with new character and quality. BCPM manufactured by the Appellant Assessee and supplied to WCS has also been converted into CWF by addition of wheat fl....
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....e that when the Department has agreed that the CWF manufactured by the Appellant Assessee are food preparations entitled for the benefit of exemption under the impugned Notification, there is no reason to deny the benefit of the exemption for the same food preparation (BCPM) supplied through the WCS. The only ground under which the benefit of the exemption notification was denied to BCPM manufactured by the Appellant Assessee is that the same has not been 'directly' supplied to the ICDS. But, we observe that there is no such stipulation in the notification that the benefit would be applicable only if the food preparations are 'directly' supplied to the ICDS. The Notification clearly states that the benefit would be applicable if the food preparations manufactured are 'intended' for supply to the scheme formulated by the Central government or State Government. 15.1 We observe that the Appellant Assessee has been awarded the contract to manufacture BCPM and supply the same to WCS for further manufacture of CWF, by adding wheat flour. A copy of the invoice raised by them for the sale of BCPM to ICDS and supplied to WCS for further manufacture of CWF is reproduced below:- 15.2 Pe....
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....r a scheme introduced by the Central Government or State Government would get defeated and the very purpose of issuance of such a notification exempting the product would also fail. As the BCPM manufactured and cleared by the Appellant Assessee has been ultimately consumed by the intended beneficiaries, we hold that the reasoning given by the Adjudicating Authority in the impugned order to deny the exemption to the said product is legally not sustainable. 15.3 A perusal of the specifications and the constituent materials for manufacture of BCPM furnished by the Expert Committee would reveal that the combination of the ingredients would make it a food preparation classifiable under chapter heading No. 1901. It is found that the Appellant Assessee supplied BCPM in 50kg bags, which can be termed as a Unit container as per the definition under section-V of the Central Excise Tariff Act, 1985. The BCPM manufactured has been exclusively sold to ICDS and delivered to WCS for manufacture of CWF. The certificate issued by the competent authority confirms the receipt of CWF manufactured by WCS using the BCPM supplied by the Appellant Assessee, which were distributed to the intended benefi....
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....d directly to the Anganwadis. The Appeallant Assessee has relied upon the decision of the Hon'ble Rajasthan High Court in the case of Hindustan Zinc Limited reported in [2009 (236) E.L.T. 633 (Raj)] in support of his contention that the benefit of the notification cannot be denied even if the goods are not supplied 'directly' to the intended beneficiary. We find that the decision supports the contention of the Appellant and it is squarely applicable to the present case. In the case of Hindustan Zinc Ltd, the assessee claimed the benefit of the Notification No. 81/1975-CE dated 22-03-1975, which is available to sulphuric acid used in the manufacture of 'fertilizers'. The assessee in that case manufactured sulphuric acid and captively consumed the same in the manufacture of phosphoric acid which in turn has been cleared for the manufacture of fertilizer and claimed exemption from excise duty payable on sulphuric acid in terms of notification No. 81/1975-CE dated 22.03.1975, as it was intended for the manufacture of fertilizer. The Department denied the exemption contending sulphuric acid was not directly used in the manufacture of fertilizer. The Hon'ble High Court held that the asse....
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....t of the notification cannot be denied even if the goods have not been used directly in the final product. As long as the goods are ultimately used for the intended purpose for which the exemption has been granted, the benefit of the exemption cannot be denied. 18. We also observe that the Commercial Tax Department has issued a clarification to the effect that BCPM is in the supply chain of the scheme and was intended for free distribution as mentioned under Clause 36(2)(v) of the Tender Document and the benefit of the Notification is applicable to BCPM. The same view is relevant for extending the benefit of the Notification to BCPM under Central Excise Act also. As the BCPM manufactured by the Appellant Assessee is intended for free distribution under the ICDS scheme and it was ultimately consumed by the beneficiaries, as evidenced by the certificates issued by the competent authority, we hold that the product BCPM supplied to WCS is entitled for the benefit of the exemption under Notification No. 12/2012-CE dated 17.03.2012. 19. Following the ratio laid down in the above decisions, the clarification issued by Board explaining the meaning of the term "intended for" and the v....
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....ed in the Notification and has rightly claimed the benefit of the exemption notification. The wordings in a Notification should not be interpreted in a way to defeat the aim or intent of the Notification. In the present case the intention of the Government is to exempt the food preparations intended for supply to the weaker section beneficiaries under the ICDS scheme. The Appellant Assessee produced the certificate to the effect that the BCPM supplied by them has been ultimately distributed to the weaker sections as intended in the notification. Thus, any other interpretation of the notification would only defeat the basic purpose and intention of the Notification. Even otherwise, the Appellant Assessee has sold BCPM to ICDS and BCPM is also a food preparation and as being covered by the terms of Notification and the Certificate issued by the competent authority, exemption from payment of duty cannot be denied. 20.3 The Hon'ble Supreme Court in the case of Mother Superior Adoration Convent reported in [2021 (5) SCC 602] held that the beneficial purpose of an exemption notification should be given full effect. The relevant portion of the said decision is reproduced below: ....
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....ent Assessee in the cost-sheet furnished in terms of Clause 9 (2&4) of the tender documents and the taxable value for those activities was thus determined. Therefore, he pleaded that the present appeal filed by the Department may be allowed. He further pleaded that in case the appeal is not sustained, the taxable value on which service tax was originally demanded should be added with the transaction value of BCPM and the excise duty payable thereon shall be added with to demand of excise duty already confirmed and thus render justice. 21.2 We observe that the Adjudicating Authority has dropped the demand of service tax raised in the Notice, as there is no separate consideration received for the services rendered. In their grounds of appeal, the Ld. Commissioner of GST & Central Excise, Salem, contended that the Respondent Assessee has provided certain service activities to WCS as mentioned in the scope of work contained in Annexure-II to the tender document, to manufacture qualitative CWF using the BCPM supplied by the Respondent Assessee. Accordingly, it was contended that the Respondent Assessee is liable to pay service tax for the services rendered by them to WCS. We observe ....
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....re-II to the tender documents are nothing but contractual obligation to be complied with in order to hold the contract for supply of BCPM for the contract period. Therefore, we observe that the Department's adoption of the entire cost under the head "Administrative Overheads, technical assistant and fine tune charges" as the taxable value for service activities, is totally arbitrary in nature and cannot be legally supported. 21.5 It is to be noted that there was no separate contract entered with the WCS for the provision of service. The activities mentioned under the scope of work with Schedule of requirements as mentioned in Annexure-II to the tender document No. 15988/NC1(2)/2015 dated 01.02.2016, is only to facilitate the WCS and help them in ensuring the quality of the product. Regarding the taxable value for the service, we observe that no separate invoice was raised towards the consideration for the services rendered. The price quoted in the tender document is a single inbuilt price per kg, and the contract entered for supply of BCPM was a single composite contract. The composite contract cannot be vivisected artificially to arrive at the value of taxable services. We find....
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.... Further clause 9(3) specifically states that data given in the cost sheet furnished under clause 9(2&4) was for the limited purpose of comparing the bidding prices of competitors. 21.8 It is an admitted fact that the Respondent Assessee paid VAT on the sale of BCPM. In view of the VAT payment, the Department took the view that BCPM is different from CWF. We observe that when BCPM was sold to ICDS and delivered to the WCS, there was a transfer of title against the consideration and VAT was paid. This VAT payment has no relevance to the provision of service rendered to the WCS, as the definition for Service excludes the transfer of title of goods as clarified in Paragraph 2.6.4 of the Education Guide issued by CBEC. Therefore, levy of service tax is not permissible on the value of goods on which VAT has already been paid. 21.9 In the above circumstances, we observe that the Lower Authority has rightly relied upon the decision of the Hon'ble Supreme Court in the case of BSNL reported in [2006 (2) S.T.R 161 (SC)] and held that the contract entered into by the Respondent Assessee is a composite contract for the supply of BCPM and no separate invoices were raised for the service c....
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..... 22.3 The Appellant Assessee submits that classification under Tariff Heading No. 19019090 as contended by the Department did not have any adverse impact on availing the benefit of the exemption as the chapter heading No.1901 alone was finding place in the exemption Notification No. 12/2012, which covered all the tariff items thereunder. Therefore, the invocation of extended period of demand under Section 11A (4) is not sustainable. They contended that the Adjudicating Authority did not consider these submissions and denied the benefit of the exemption contained in the Notification No. 12/2012 only on the basis of misinterpretation of the term "intended for" figuring in the notification. In the impugned order, it has been held that the BCPM has not been supplied directly to the beneficiaries and hence the benefit of the exemption cannot be extended. There is no other ground raised in the impugned order for invoking the extended period of limitation. 22.4 We observe that the Appellant Assessee submitted ER-1 Monthly returns periodically containing all the details relating to BCPM including the fact that "BCPM has been supplied to WCS for the manufacture of CWF". The audit par....
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....ree distribution and cannot be sold, as the terms 'Not for sale' are printed thereon. (iv) The BCPM has been used in the manufacture of CWF by WCS and packed in 1kg and 2 kg bags, and sold for free distribution. Thus, the Appellant Assessee fulfilled the condition 'intended for' free distribution to economically weaker sections of the society under a program duly approved by the Central Government or any State Government', as stipulated in the Notification No. 12/2012-CE dated 17.03.2012. (v) The Appellant Assessee has produced the required 'certificate from an officer not below the rank of the Deputy Secretary to the Government of India or not below the rank of the Deputy Secretary to the State Government concerned to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concerned,' as stipulated in condition no. 5 of the Notification No. 12/2012-CE. (vi) The BCPM manufactured and sold to ICDS, but delivered to the WCS are intended for free distribution to economically weaker sections of the society under a prog....
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....n's Development Industrial Co-op Society." Nuk Perumal Kovil Street, Agathapatti Village. Kalliludi, Madurai-025 701. PAN: AABAT73881. This invoice in raised an Account of Mabathma Gandhiji Weaning Food Society. Kallikud! as por their acknowledgement No. BL 142/17-18 dt.11/06/2017 The materials have been supplied for manufacture of Couplemetary Wenung Food to supply ideal for the month of June '2017 Vide ROC No. 6658/NC1-3/17 dt.08.08.17 Description Blend of Critical Processed Materials TNVAT 5% (Preparation for use of infants of 6 Months & above intended for Free Distribution) According to the conditions, 10% of the value claimed TNVAT5% Total Qty. MTs. Rate/MT Rs Amount Rs 102.400 82.350 193,73,0-10 Amount (in Words} Total Rupees Fourteen Lace Four Thousanda Two Hundreds and Thirty Two only 6.68.082 140.42.323 13.37,364 G0,803 14.04.232 Any other applicable taxes & duties if any, as demanded by appropriate authorities shall be charged PAN ADOPK5292P E&OE Seem C. Malai Vizhi 5/3/21 For Christy Friedgram Industry M. Vannakannany DM Acutta Document 2 "To....