Water Treatment Plants – Exemption to pipe fittings – Board against Minister
It has been brought to the notice of the Board that the manufacturers of pipe fittings (joints, sleeves, elbow, couplings, etc.) are claiming the benefit of the Sl. No. 7 of the Notification No. 6/06-C.E.
This notification exempts, Pipes needed for delivery of water from its source to the plant (including the clear treated water reservoir, if any, thereof), and from there to the first storage point;
Board has come to know that some units are manufacturing pipes and pipe fittings and claiming benefit of notification for pipe fittings which are cleared along with pipes. The issue is whether the 'pipe fittings' in the water supply network are also exempted.
Board clarifies that the intention behind the notification is to provide exemption only to pipes as understood in the common parlance and not to fittings which is a separate commodity and known differently in the market.
Further, even though the Tariff heading in which the pipes fall is not specified in the notification but they are covered under the description given in the notification in column 3. The description only specifies 'Pipes needed...'. There is no mention of any pipe fittings. Further, pipe fittings are a separate commodity and cannot be subsumed under the generic terms 'Pipes'. A glance at the Tariff shows that the pipe fittings are classified separately from pipes. This clearly implies that the two commodities are different. Even the HSN classifies them separately.
Therefore, Board is of the view that exemption at Sl. No. 7 of the Notification No. 6/06-C.E. is not available to 'pipe fittings' used in the pipe network for supply of drinking water.
Perfectly logical and legal. It is only the Indian bureaucrat who will use all his intelligence and ingenuity (both of which he is richly endowed with) to ensure that the citizen does not get what the government wants to give him. It is only a master brain that can think of giving exemption to pipes but not to the joints and elbows. How on earth are the pipes going to be fitted? Was the idea to deny exemption to the pipe fittings or to exempt the goods used in water treatment plants?
Now the whole saga of Show Cause Notices, adjudication, appeal and so on will start enriching the consultants. If the pipe fittings were not legally eligible for the exemption, the Board should have amended the notification and issued a Section 11C Notification for the past period instead of communicating to the nation that this Board is against the very policy of the Government to provide water.
Water has been on the high priority of the government’s pronounced programmes.
In his 2004 Budget, the Finance Minister said, “The poor want drinking water: we shall ensure that every habitation has an assured source of drinking water.
In the 2005 Budget he said, “The UPA Government’s goals are: ......to provide drinking water to the remaining 74,000 habitations that are uncovered.
In the 2008 Budget he said, “Our children should have good, clean drinking water”
Now just before the 2009 Budget, the Board wants to collect a few pennies from the water treatment projects. Is it worth all the trouble?
As such manufacturers of pipes are not keen to avail the exemption because of the complications of CENVAT Credit – dutiable and exempted goods and all that confusion.
That incidentally is another issue which the Board should seriously consider. If they want to grant exemption to any product, make the duty 1% instead of total exemption. This will ensure that all litigations about dutiable and exempted goods are avoided.
Anyway for now all those manufacturers who claimed exemption for pipe fittings – be ready to face the music from Central Excise.
CBEC Circular NO. 891/11/2009-CX, Dated : June 15, 2009