2023 (7) TMI 192 - AT - Central Excise

Exemption to goods supplied to projects funded by the U.N. or other international organizations under N/N. 108/95 dated 28.08.1995 - denial on the ground that the supplied goods were not in the nature of being consumed in the core activity of the project on permanent basis - also alleged that contractors purchased the goods in their own name, from their own funds - denial on the basis of clarification given by the Circular dated 12.06.2008 - HELD THAT - Notification 108/95 grants exemption to all goods required for execution of the projects financed by international organizations like World Bank, Asian Development Bank etc. To claim the exemption, the manufacturer has to obtain a certificate from the head of the Project Implementing Authority, countersigned by an officer not below the rank of Joint Secretary to the Government of India or Principal Secretary or Secretary to the state Government, to the effect that the goods are required for execution of the project, which has been approved by the Government of India. The Appellant has got the certificates and hence they fulfilled the condition stipulated in the Notification 108/95 dated 28.08.95, to avail the exemption. The Appellant stated that after introduction of Explanation 2 to the Notification, CBEC issued clarification vide Circular dated 12.06.2008, which has added words to the Notification which were not there. As per the Circular, the exemption is applicable to goods which form part of the project on permanent basis and not to goods which are used for execution of the project and after completion of the project remain with the contractors, for further deployment in other projects. This interpretation has not been envisaged in the Explanation2 - the department has interpreted the Explanation 2 wrongly. The Explanation 2 would only mean that the goods brought into the project should not be withdrawn by the contractor during the course of execution of the project. After the project is completed the contractor is well within his right to withdraw the capital goods and machinery used in execution of the project, since it does not form part of the structure of the project. This view has been taken by the Tribunal in the case of M/S. SCHWING STETTER (I) PVT. LTD. VERSUS CCE AND ST, LTU, CHENNAI 2018 (1) TMI 764 - CESTAT CHENNAI where it was held that The department cannot later turn around to deny exemption by interpreting Explanation 2 to the effect that the exemption is not available if the goods are withdrawn from project site . The Appellant are eligible for the benefit of the Notification 108/95 dated 28.08.95, for the chassis cleared to the projects funded by international organizations, as they have fulfilled the conditions stipulated in the Notification. Accordingly, the impugned order is liable to be set aside - Appeal allowed.

Summary

Issues Involved:

1. Eligibility for the benefit of Exemption Notification 108/95.
2. Interpretation of Explanation 2 to the Exemption Notification.
3. Validity of CBEC Circular dated 12.06.2008.
4. Applicability of previous Tribunal decisions.

Summary:

1. Eligibility for the benefit of Exemption Notification 108/95:
The Appellant, engaged in manufacturing commercial motor vehicles/chassis, claimed the benefit of Exemption Notification 108/95 for goods supplied to World Bank-funded projects. The Notification grants exemption to all goods required for the execution of such projects, provided a certificate from the Project Implementing Authority, countersigned by a government officer, is obtained. The Appellant had produced the necessary certificates, fulfilling the stipulated conditions.

2. Interpretation of Explanation 2 to the Exemption Notification:
Explanation 2, inserted effective 01.03.2008, clarifies that the exemption is available when goods are not withdrawn by the supplier or contractor during the project execution. The department interpreted this to mean that only goods consumed in the project are eligible for the exemption. The Tribunal observed that this interpretation is incorrect. The correct interpretation is that goods should not be withdrawn during the project execution, but can be withdrawn after project completion without losing the exemption.

3. Validity of CBEC Circular dated 12.06.2008:
The Circular clarified that the exemption applies only to goods forming a permanent part of the project. The Appellant argued that this interpretation added words to the Notification not originally present. The Tribunal agreed, stating the Circular's interpretation went beyond the Notification's mandate.

4. Applicability of previous Tribunal decisions:
The Appellant cited the case of *Schwing Stetter (I) Pvt. Ltd Vs CCE&ST.LTU, Chennai-2018 (364) ELT 653 (Tri.-Chennai)*, where it was held that goods withdrawn after project completion still qualify for the exemption. The Tribunal found this decision applicable and supportive of the Appellant's case.

Conclusion:
The Tribunal held that the Appellant is eligible for the benefit of Exemption Notification 108/95 for the chassis cleared to World Bank-funded projects, having fulfilled the Notification's conditions. The impugned order was set aside, and the appeal was allowed with consequential relief.