Case Law Details
IGP Engineers Pvt Ltd Vs Commissioner of GST & Central Excise (CESTAT Chennai)
In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai has held that duty exemption on gasket cannot be denied merely due to an initial mismatch that was later rectified. The case involved IGP Engineers Pvt Ltd, a subcontractor for Larsen & Toubro Ltd (L&T) in a power project, which appealed against the denial of duty exemption for a large number of gaskets.
The dispute centered around the issuance of the Project Authority Certificate (PAC) to a different unit of IGP Engineers Pvt Ltd than the one that supplied the gaskets. The revenue department argued that the system of exemption based on PAC was to prevent misuse and as the payment of duty should be on the date of clearance of goods, the PAC should predate the clearance.
However, the CESTAT noted that the appellant provided a reasonable explanation for the mismatch – operational convenience – and later rectified the PAC to reflect the actual clearances made to the project. It also emphasized that the LOI and PO for the supply were addressed to the IGP’s head office, and there were no allegations of clandestine clearance. The tribunal concluded that when the goods had been found to be cleared for an eligible power project, duty exemption should not be denied merely due to an initial mismatch that was later rectified.
This judgment underlines the flexibility and practical approach of CESTAT in interpreting excise duty regulations. It emphasizes the principle that if a business is operating within the rules and rectifies an initial mismatch, it should be eligible for exemptions provided by law. Businesses and tax professionals should take note of this ruling as it provides valuable insights into CESTAT’s approach to duty exemptions and the importance of maintaining clear documentation.
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