Duty Exemption on Gasket cannot be Denied Merely Because of Mismatch Occurred Initially which in later Rectified: CESTAT [Read Order] 

The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) have held that duty exemption on gasket cannot be denied merely because of a mismatch that occurred initially which in later rectified.

M/s. IGP Engineers Pvt. Ltd, the appellants are manufacturers of rings and ring joint gaskets. They are a sub-contractor of the main contractor ie M/s.Larsen & Toubro Ltd (L&T) for a power project awarded by M/s. Cairn Energy India Pty. Ltd. under International Competitive Bidding.

The appellant has cleared 8525 numbers of gaskets valued at Rs.15,92,077/- claiming exemption from duty under Notification No. 6/2006 CE dated 1.3.2006. Revenue denied the claim of exemption from duties under the said notification since the Project Authority Certificate (PAC) was issued by M/s. Cairn Energy India Pvt. Ltd. to the IGP unit situated at Kottivakkam and not to the appellant unit situated at Sembakkam.

After due process of law, the adjudicating authority held that the claim of exemption was erroneous and demanded Rs.1,37,187/- as central excise duties on clearances made during April 2009, along with interest and imposed a penalty equal to duty under Rule 25 of the Central Excise Rules, 2002.

On appeal before Commissioner (Appeals), the impugned order held that in the absence of PAC prior to the date of clearance and in the absence of any reference in the invoice of the appellant to contract dated 12.3.2008 awarded under ICB to L&T, the impugned goods were not eligible for exemption under the Notification and dismissed the appeal.

It was stated that the system of allowing exemption based on PAC issued by the Project Authority is to ensure that the exemption is not misused by unscrupulous elements and since the payment of duty has to be on the date of clearance of goods, the PAC issued should predate the clearance.

“When the goods have been found to have been cleared towards the power project under ‘International Competitive Bidding’ which was eligible for duty exemption, the LOI and PO for the supply were addressed to IGP’s HO and there is no allegation of clandestine clearance etc, duty exemption benefit cannot be denied merely because the initial PAC was in the name of Kottivakkam unit and not in the name of Sembakkam unit on the date of clearance when the PAC was also rectified later.”, the CESTAT held.

The two-member bench comprising Ms Sulekha Beevi C.S., Member (Judicial) and Shri M. Ajit Kumar, Member (Technical)  held that “the appellant is eligible for availing exemption from duty under Notification No. 6/2006 CE dated 1.3.2006 for the impugned goods. This being so demand for interest and penalty do not survive.” The bench set aside the impugned order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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