1999 (2) TMI 618 - AT - Central Excise

Summary

Issues:
Interpretation of Notification No. 123/81 for duty exemption on specific items brought in by a 100% Export-Oriented Unit (EOU).

Analysis:
The case involved an appeal against the order of the Collector of Central Excise (Appeals), Allahabad, upholding a duty demand on various items brought in by the appellants, a 100% EOU. The duty demand was due to the denial of exemption under Notification No. 123/81 for items like A.C. sheets, Air-conditioners, Fire-proof doors, Syntex Water Tanks, Flush doors, Lighting Accessories, Furniture, Fixtures, and Typewriters. The issue was whether these items qualified as 'Capital goods, components, raw materials, spares, and packaging materials' under the notification and were used in connection with manufacturing and packaging of articles.

The tribunal considered the connection of the disputed items with the manufacture of the final product, film yarn. The appellants presented a chart demonstrating the utilization of each item in the manufacturing process. The tribunal analyzed the specific use of items like A.C. Sheets, Fire-proof doors, Air-Conditioners, Syntex Tanks for water, Furniture, Fixtures, and Typewriters in connection with the manufacturing activities. It referenced previous decisions to support the interpretation of the notification regarding the eligibility of certain items for duty exemption based on their direct connection to the manufacturing process.

Referring to precedents, the tribunal highlighted cases where similar notifications were extended to items like asbestos sheets, high-speed diesel oil, trucks, drill spares, and water sprinklers used in connection with manufacturing activities in EOUs. The tribunal applied the principles established in these cases to determine the eligibility of the disputed items for duty exemption under Notification No. 123/81.

The tribunal concluded that A.C. sheets, Fire-proof doors, and a specific number of Air-conditioners were eligible for the benefit of exemption under the notification as they were deemed excisable capital goods used directly in connection with the manufacture of the final product, filament yarn. However, the benefit was denied for Syntex tanks for water, Furniture, Fixtures, Typewriters, Flush doors, and Lighting Accessories as these items were considered office equipment and not directly linked to the manufacturing process.

The tribunal directed the jurisdictional Assistant Commissioner to requantify the duty demand on certain items and reduced the penalty imposed on the appellants from Rs. 1 lakh to Rs. 50,000 considering the reevaluation of duty liability based on the granted exemptions.