2001 (7) TMI 914 - AT - Central Excise

Summary

Issues:
1. Eligibility of shell sand for exemption under Notification No. 217/86.
2. Interpretation of the proviso to Notification No. 217/86 regarding exemption of inputs used in the manufacture of final products.

Issue 1 - Eligibility of shell sand for exemption under Notification No. 217/86:
The case involved M/s. DCM Engineering Products Ltd., manufacturers of rough iron castings, contesting the demand for duty on shell sand, claiming it to be an exempt input under Notification No. 217/86. The appellants argued that shell sand, used in the manufacture of iron castings within the same factory, should be eligible for exemption as it meets the criteria of being an input used in relation to the manufacture of the final product. They cited a previous Tribunal decision supporting their claim, emphasizing that the shell sand is captively used for the manufacture of the final product, iron casting. The Tribunal agreed with the appellant's submissions, highlighting that the use of shell sand in the manufacture of iron castings qualifies for exemption under Notification No. 217/86, despite the exemption granted to sand moulds under a different notification.

Issue 2 - Interpretation of the proviso to Notification No. 217/86:
The second issue revolved around the interpretation of the proviso to Notification No. 217/86, which excludes exemption for inputs used in relation to the manufacture of final products that are themselves exempted from duty. The respondent contended that since the final product, sand moulds, was exempted under a different notification, the shell sand used in their manufacture should not be eligible for exemption under Notification No. 217/86. However, the Tribunal clarified that the sand moulds were not the final product in this case; rather, the final product was iron castings. As only iron castings attracted duty and not sand moulds, the shell sand used in manufacturing iron castings was deemed eligible for exemption under Notification No. 217/86. The Tribunal relied on precedent to support this interpretation and ruled in favor of the appellant, allowing the appeals and granting consequential relief.

In conclusion, the judgment clarified the eligibility of shell sand for exemption under Notification No. 217/86, emphasizing the importance of the final product in determining exemption status for inputs used in its manufacture. The Tribunal's decision aligned with previous rulings and established a clear interpretation of the proviso to the notification, ensuring consistency in the application of excise duty exemptions.