Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
Circular No. 945/6/2011-CX
New Delhi, dated the 16th May, 2011
To
The Director General (All)
The Chief Commissioners of Central Excise (All)
The Chief Commissioners of Central Excise and Customs (All)
Sir/Madam,
Subject: Benefit of Central Excise duty exemption on pipes against S. No. 7 in
column (3) of the
Notification No. 6/2006 (CE) dated 1-03/06 as further amended
vide No. 6/2007 dated 1-3-07 & 26/2009 dated 4/12/09.
Kind attention is invited to the Sr. No.7 of the
notification No. 6/2006 –C.E
dated 1.3.2006; as amended time to time, providing full exemption from excise
duty which is currently available to
- all items of machinery, including instruments, apparatus and appliances,
auxiliary equipment and their components/parts required for setting up of water
treatment plants;
- 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;
- Pipes and pipe fittings of outer diameter exceeding 10 cm when such pipes
are integral part of water supply projects.
- The scope of this exemption, as provided in the entries (1) and (2) of this
notification was delineated in the CBEC circular 659/50/2002-CX dated
06-Sep-2002. It clearly indicated that the exemption is limited to pipes needed
for delivery of water from its source to the water treatment plant and from
there to the first storage point and that the duty concession was not available
for pipes required to supply the treated water from its storage place to the
place of consumption. This was the correct reflection of the scope as it existed
at the relevant time. However, the scope of this notification was widened by
inserting entry (3) to this notification thereby extending the benefit of excise
duty exemption also to the pipes of outer diameter exceeding 20 cm when such
pipes are integral part of water supply projects by amendment vide
Notification
No. 6/2007 dated 1-3-07 and subsequently vide
Notification No. 26/2009 dated 4-12-09, the outer diameter exceeding 10 cm was prescribed for exemption.
- Doubts have been raised 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.
- The matter has been examined. The amendments made to the notification w. e. f
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.
- Trade & industry as well as field formations may please be informed suitably.
- Receipt of this circular may please be acknowledged.
Yours Faithfully
(Yogendra Garg)
Director
Tax Research Unit
F. No. 354/34/2008-TRU