Central Excise - Exemption on Pipes for Water Treatment Plants - CBEC Clarifies
WHEN it comes to taxes, our Board is really pound foolish and pennywise. Machinery and pipes used for water treatment plants were exempted by Sl. No. 7 of Notification No. 6/2006 dated 1.3.2006. A noble exemption to reduce the cost of supplying water to the citizens, which should be a primary duty of the government, in which they miserably failed.
Let us see the history of this exemption:
I. The Original notification 6/2006 dated 1.3.2006 exempted:
(1) All items of machinery, including instruments, apparatus and appliances, auxiliary equipment and their components/ parts required for setting up of water treatment plants;
(2) Pipes needed for delivery of water from its source to the plant and from there to the storage facility.
Explanation. - For the purposes of this exemption, water treatment plants includes a plant for desalination, demineralization or purification of water or for carrying out any similar process or processes intended to make the water fit for human or animal consumption, but does not include a plant supplying water for industrial purposes. II. This was amended by Notification No. 6/2007 dated 1.3.2007 as follows:
for item (2), the following shall be substituted, namely:- 2. 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;
3. Pipes of outer diameter exceeding 20 cm when such pipes are integral part of the water supply projects.”;
III. This was further amended by Notification No. 26/2009 dated 4.12.2009 as:
In item (3), for the figure and letters “20 cm”, the figure and letters “10 cm” shall be substituted.
IV. So now the notification reads as:
1) All items of machinery, including instruments, apparatus and appliances, auxiliary equipment and their components/ parts required for setting up of water treatment plants;
2) Pipes and pipe fittings 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;
3) Pipes and pipe fittings of outer diameter exceeding 10 cm when such pipes are integral part of the water supply projects.
Explanation.-For the purposes of this exemption, water treatment plants includes a plant for desalination, demineralization or purification of water or for carrying out any similar process or processes intended to make the water fit for human or animal consumption, but does not include a plant supplying water for industrial purposes.
Now there is a doubt as to whether the exemption pertaining to pipes of outer diameter exceeding 10 cm applies only to pipes required for the delivery of water from its source to the plant and from there to the first storage point or whether it includes pipes required for the distribution network also.
And the Board clarifies:
The amendments made to the notification with effect from 01.03.2007 were in view of the policy objective of providing potable water for domestic use. The purpose of the insertion of sub-entry (3) w. e. f. 1.3.2007 was to obviate disputes about the scope of the term “first storage point” which shifts depending on the layout and the nature of the project and to replace it with the more objective criterion of pipe diameter. Subsequently the diameter specification was reduced from 20cm to 10cm. The only qualification prescribed in sub-entry (3) is that the pipes should form an integral part of the water supply project. As such, post 1.3.2007, the benefit of this exemption is available to pipes of outer diameter 20cm (10cm w. e. f 4.12.2009) even if they are used in the distribution network beyond the first storage point. However, the benefit is confined to the pipes that form a part of the project. Thus, pipes which are used at the last mile to provide the consumer connection whose cost is either paid by the consumer or recovered from him do not form part of the project and will not be eligible for the exemption.
How much money is the Government going to save by denying the exemption to the so called last mile? And how much litigation are they going to generate by this circular? Should the Board be working overtime just to deny small benefits, especially for vital projects like water supply? Should the best brains of the country be wasted (vested) with such powers?
CBEC Circular No. 945/6/2011-CX , Dated: May 16, 2011