Customs, Excise and Gold Tribunal - Mumbai
Echjay Industries Ltd. vs Commissioner Of C. Ex. on 18 June, 2002
Equivalent citations: 2002(146)ELT391(TRI-MUMBAI)
ORDER
K.K. Usha, J. (President)
1. The appeal, at the instance of the assessee is directed against the order passed by the Commissioner (Appeals), dated 11-9-96. The appellants are engaged in the manufacture of parts of motor vehicles, tractors, etc., and they were availing exemption of Central Excise duty under the Notification No. 217/86-CE., dated 2-4-86 in respect of forged articles of iron and steel which were captively consumed in the manufacture of parts of motor vehicles and tractors, etc. They were also availing the benefit of exemption under Notification No. 239/86, dated 3-4-86 in respect of their products, parts of vehicles and tractors, etc. Show cause notice dated 20-5-94 was issued to them demanding duty to the extent of Rs. 22,12,197/- on the ground that forged articles of iron and steel falling under Sub-heading 7326.90 were not eligible for exemption under Notification No. 217/86, dated 2-4-86 when the same were removed and captively consumed for the manufacture of parts of motor vehicles and tractors etc. falling under Sub-heading 8708.00 since the said final products were being cleared without payment of duty under exemption Notification No. 239/86, dated 3-4-86. According to the assessing authority the claim of the assessee is unsustainable as the unmachined forgings cannot be used in the manufacture of motor vehicles and tractors, they cannot be considered as parts of motor vehicles and tractors. The above finding was affirmed by the Commissioner (Appeals). Aggrieved by these orders, the assessee has come up in appeal.
2. The only issue that has to be considered in this appeal is whether the assessee is entitled to claim the benefit of exemption in respect of the unmachined forgings produced by it as per Notification No. 239/86, dated 3-4-86. The relevant notification reads as follows :-
"Exemption to parts of motor vehicles and tractors falling under Chapter 45, 48, 68, 73, 85 or 87 - In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts parts of motor vehicles and tractors falling under Chapter 45, 48, 68, 73, 85 or 87 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from the whole of the duty of excise leviable thereon which is specified in the said Schedule:
Provided that -
(i) it is proved to the satisfaction of an officer not below the rank of an Assistant Collector of Central Excise that the said parts are intended to be used as original equipment parts in the manufacture of -
a) tractors of engine capacity not exceeding 1800 cubic centimetres and electrically operated two-wheeled and three-wheeled motor vehicles falling within Chapter 87 of the said Schedule."
It is contended on behalf of the appellants that the adjudicating authority as well as the appellate authority have committed an error in coming to the conclusion that the above notification is not applicable to the appellants case as the unmachined forgings are not directly used in the manufacture of tractors or motor vehicles but are used only for production of components captively consumed in the manufacture of tractors or automobiles. The appellant points out that the notification applies to the products falling under Chapters 73 and 87 and unmachined forgings have been classified by the department under Tariff Sub-heading 7326.90. Circular No. 2/87, dated 18-2-87 issued by Government of India clarifying the scope of exemption under Notification No. 239/86 was also relied upon by the appellant.
3. The clarification was necessitated since the exemption under Notification No. 239/86 was not being allowed on the Sub-assemblies of finished auto-electrical components which are manufactured in the same factory and utilised within the factory for the manufacture of finished auto-electrical components, which are finally cleared from the factory at nil rate of duty in terms of the above notification. It was then clarified that the Sub-assemblies of finished auto-electrical components falling under the chapters referred in the notification, and used within the factory of production for the manufacture of finished auto-electrical components which are finally cleared from the factory at nil rate of duty as auto-electrical parts for use in the manufacture of tractors would also qualify for exemption under Notification No. 239/86 provided the conditions prescribed in the said notification are satisfied.
4. We see the contentions raised by the appellant is supported by a decision of this Tribunal in Collector of Central Excise, Cochin v. Steel & Industrial Forcings Ltd. [2001 (129) E.L.T. 269]. The assessee therein was also manufacturing steel forgings and claimed exemption under notification dated 3-4-86. The Assistant Collector denied the exemption on the ground that they were roughly shaped forgings which cannot be used directly in motor vehicle parts. On appeal, the Commissioner (Appeals) took the view that since the department had already classified those goods under Pleading 73.26 and the notification clearly includes the goods falling under Chapter 73 for granting benefit of the notification, there is no reason to deny the benefit of exemption. Referring to the view taken by the assessing authority that the goods are not used directly as motor vehicle parts, Commissioner (Appeals) pointed out that in fact none of the parts falling under Chapter 73 can be used directly as motor vehicle parts. Even though they required further processing since they have reached such a stage of manufacture that they cannot be used for any other purpose, the legislature has decided to treat them as motor vehicle parts and extended the benefit of exemption to them. The above finding of the Commissioner (Appeals) was upheld by the Tribunal. In the above order of this Tribunal two other earlier decisions were also referred viz. Collector of Central Excise v. Mahendra Engg. Works [1993 (67) E.L.T. 134] and Tata Engineering & Locomotive Co. Ltd. v. Collector of Central Excise, Pune [1999 (106) E.L.T. 222]. In Mahendra Engg. Works it was held that stampings and laminations used in electric motors in rotors or stators which in turn is used as component parts in manufacture of power driven pumps could be entitled to the benefit of the exemption under Notification No. 64/86 as amended by Notification No. 236/86. In Tata Engineering & Locomotive Co. it was held that parts used in manufacture of I.C. Engine which were in turn used in manufacture of motor vehicle are to be considered as parts of motor vehicle.
5. We are in respectful agreement with the above view expressed by the Tribunal on the interpretation of Notification No. 239/86. If that be so, we have to hold that the assessing authority as well as the appellate authority have wrongly denied the benefit of the notification 239/86 to the appellant. The impugned order is, therefore, set aside and the appeal stands allowed.