Customs, Excise and Gold Tribunal - Bangalore
Waterbase Limited vs Commissioner Of Central Excise on 9 March, 2004
Equivalent citations: 2004(170)ELT198(TRI-BANG)
ORDER C.N.B. Nair, Member (T)
1. The appellant M/s. Waterbase Limited is an aquaculture company, located in coastal Andhra's Nellore District. Its business is to grow and export shrimps (frozen). It has been approved by the Government of India as 100% EOU. It procured some materials under Customs Notification No. 123/81 which exempted the following:
"excisable capital goods, components, raw materials, consumables, sparers and packaging materials (hereinafter referred to as the goods) when brought in connection with the manufacture and packaging of articles into an undertaking approved by the Board of Approval for hundred per cent Export Oriented Undertakings".
Notification also prescribed procedure for obtaining the approval of Excise authorities for duty free procurement of the goods. The appellant has obtained such approvals also for the items. However, subsequently, dispute arose about the eligibility of some of the items for the exemption. Under the impugned order, Commissioner (Appeals), Central Excise, Hyderabad held that following goods were not eligible for exemption :
"(i) 96 Kilolitres of HSD oil (high speed diesel oil) (ii) Electric Motor (iii) Base plate with coupling (iv) Split room Air conditioner for air conditioning (35 Nos.) (v) Window type room air conditioner for same utility as mentioned above (5 Nos.) (vi) Wireless equipment for communication (44 Nos.) (vii) Floodlights for the purpose of lighting bonded areas (viii) Street lights for the same purpose as mentioned above".
We read the impugned order in order to note the reasons for reaching the finding that the goods are not eligible for exemption -
"7. The issue involved in the instant appeals is regarding the eligibility to the benefit of exemption under Notification No. 123/81-C.E. dated 2-6-81 on Air-conditioners (both split and window), Wireless equipment, Flood lights/street lights, water pump, motors and base plate, PSCC pipes and HSD oil.
(i) I find that Air-conditioners (both split and window), wireless equipment, flood lights/street lights are consumer goods and cannot be categorised as capital goods. The appellants have also admitted that they have utilised some of the Air conditioners in the earlier stages for the administrative building. Utilisation of the air conditioners in the Administrative building is for the comfort of Administration personnel of the unit and is not connected with the manufacture of the goods. Flood lights/street lights are used for lighting purpose in the bonded area. Similarly, wireless equipment is used for communication purposes between the various personnel of the unit as a matter of administrative convenience. Hence, flood lights/street lights/wireless equipment cannot be considered as brought in connection with the manufacture of the goods. Hence, the benefit of exemption under Notification No. 123/81-C.E., dated 2-6-1981 has been rightly denied by the Assistant Commissioner on all these items.
(ii) Water pump, motors, base plate have been installed in the pump house near the mouth of the sea which is about 1.5 km. away from the approved bonded area. Pipe line with PSCC pipes has been laid to draw sea water from the pump house near the sea shore for supply to the bonded prawn ponds of the appellants. The PSCC pipes in question lie outside the approved bonded area. Since all these goods are used outside the approved bonded area, the benefit of exemption under Notification No. 123/81-C.E., dated 2-6-81 has been rightly disallowed by the Assistant Commissioner.
(iii) As regards the eligibility to the benefit of exemption under Notification No. 123/81-C.E., dated 2-6-1981 on HSD oil is concerned, I find that this issue has already been dealt with by me vide para 12 of my Order-in-Appeal No. 12/2000-(G)Cus., dated 29-9-2000 in the case of the appellants themselves. For the reasons, contained in the Order-in-Appeal No. 12/2000-(G)Cus., dated 29-9-2000, I hold that the appellants are not eligible to the benefit of exemption under Notification No. 123/81-C.E., dated 2-6-81 on HSD oil."
2. In the present appeals, the contention raised is that the order is not sustainable in the face of the terms of the exemption Notification. It is being pointed out that exemption covered farm activities like floriculture, aquaculture as manufacturing activity and the coverage is also broad and comprehensive as to take in all manner of goods finding place in such activities. Appellants have pointed out that all the items in question are essentially required for carrying out aquaculture business and the condition for exemption is that the goods are "required" by such undertaking for manufacture and packaging of articles and are brought directly to the factory of manufacture and are used in the manufacture of such articles [condition (b) of the Notification]. Learned Counsel emphasised that the goods were procured only after the requirement was approved by the Central Excise authorities. Learned Counsel took us to each of the items and explained that it is required for the business of growing, processing and exporting of shrimps. It has been pointed out that the appellant's unit consists of Hatchery Farms, Process Piant and Feed plant and for the growing of shrimps. Controlled temperature is required for several of the operations. Several inputs like vitamin premix, mineral premix as feed for the shrimps are also required to be kept in low temperature. It is the appellant's submission that all the air-conditioning equipment in question are installed in such areas and that a few air-conditioners which were originally installed in the Administrative Block have also been moved to laboratories and that Commissioner's observation that some of them were admitted to be used in Administrative Block is not correct. With regard to electric motor and base plates coupling etc. the appellant's explanation is that the motor is used for pumping sea water into the farm and sea water is the prerequisite for growing shrimps, for shrimp grows only in the sea water. It is also pointed out that High Speed Diesel (HSD) oil is used for running DG set to generate power continuously to supply oxygen to millions of shrimps stored in their ponds through aerators, which is essential as otherwise even momentary failure of power will result in heavy mortality. Appellant therefore, submitted that HSD oil is a consumable item. Similarly, lighting in the bonded area and other areas is also essential since shrimps are active in the night and they are required to be kept under constant supervision for their state of health. Appellants have submitted that the role of lighting in aquaculture is different from the normal role of lighting in townships or business premises. With regard to wireless equipment the appellant's explanation is that in a spread out aqua farm this is the only feasible and efficient mode of communication among the work force and managers to ensure that the farm is maintained properly and shrimps arc taken care of. Appellant's counsel has emphasised that each line of business is required to be understood keeping in mind its peculiar needs and the Notification construed accordingly. The submission is that since Notification No. 123/81 is widely comprehensive, all the items should be treated as eligible for the exemption.
3. Learned Counsel has pointed out that the issue raised about the eligibility of HSD oil remains covered by the decisions of this Tribunal in the case of CCE v. Kudrermukh Iron Ore Co. Ltd. - 1988 (36) E.L.T. 626 wherein this Tribunal held that HSD oil used for running special purpose dumper for carrying crude ore to the crusher is eligible under Notification No. 123/81. He has also pointed out that this order of the Tribunal was confirmed by the Apex Court [1997 (89) E.L.T. A112 (S.C.)]. Learned Counsel has also referred to the decision of this Tribunal in the case of CCE, Trichi v. Suvarna Florex Ltd. - 2002 (148) E.L.T. 191 wherein the Tribunal held that refrigerated truck, diesel generating set with mobile refrigeration unit and cold storage unit, transformer and air-conditioning unit are all items eligible for exemption for cut flowers business. Learned Counsel has also referred to the decision of this Tribunal in the case of Reesan Info Management Resoruces (I) P. Ltd. v. CCE. & CHS, Cochin - 2001 (133) E.L.T. 644 wherein it was held that tables, linking sides, screen panels, shelves, self columns etc. etc. are eligible for benefit under Notification 123/81.
4. As against the above contentions on behalf of the appellants, learned SDR has reiterated the findings of the Commissioner (Appeals) and has also drawn attention to the Larger Bench decision of this Tribunal in the case of Vikas Industrial Gas v. CCE, Allahabad - 2000 (118) E.L.T. 257 wherein the Tribunal held that pumps used for delivering water from reservoir will not be eligible for capital goods credit under Rule 173Q.
5. Notification No. 123/81 is vast in its coverage inasmuch as it grants exemption from excise duty to all manner of items [capital goods, components, consumer items, spares, packing material] required by an EOU for its manufacturing activity. Aquaculture is an extremely sensitive business inasmuch as it involves taking care of a delicate life mechanism. Purity of water, its temperature are all very important for the survival and healthy growth of shrimps. So is the need for inputs like vitamins premix, feed. Pump and connected items are used for bringing sea water, which is inescapably required for a shrimp farm. The air-conditioning units are used in laboratories and other places directly in connection with farming operations. Appellant has clarified equipment originally installed in the office during the setting up of the unit have all been shifted to the farm, once the same has been established. The unique communication and lighting needs are also to be accepted in the nature of aquaculture business. The appellant is right in its reliance on the decision of this Tribunal in Suvarna Florex Ltd. Farm operations, whether it is aquaculture or floriculture, are very sensitive activities as they deal with living creature whether they are shrimps or cut flower. In the case of Suvarna Florex Ltd., realizing the peculiarities of the business, this Tribunal approved the eligibility of air-conditioners, transformer, diesel generating set, refrigerated truck etc. The eligibility for High Speed Diesel Oil remains approved by the Hon'ble Supreme Court [1997 (89) E.L.T. A112 (S.C.)].
6. In the light of what is stated above, we are of the opinion that the items in question are covered by the exemption. The appeals are allowed after setting aside the impugned order.