2004 (6) TMI 343 - AT - Central Excise

Summary

Issues involved:
Interpretation of Notification No. 62/95-C.E. regarding exemption for waste and scrap cleared outside the Ordnance Factory.

Detailed Analysis:

Issue 1: Interpretation of Notification No. 62/95-C.E. exemption
The appeal raised the issue of whether the benefit of Notification No. 62/95-C.E., dated 16-3-95 is available to waste and scrap cleared outside the Ordnance Factory. The Appellant argued that the scrap generated during the manufacture of arms and ammunition is intended for consumption by the Ordnance factories, as it is used in manufacturing cups for ammunition, ultimately consumed by the Members of Armed Forces. The Appellant contended that the extended period of limitation for demanding duty is not applicable due to a bona fide belief in exemption under Notification No. 62/95. They cited a Tribunal decision supporting this argument. The Respondent, however, argued that the scrap removed to job workers does not qualify for the exemption under Notification No. 62/95, as it is not directly consumed by the Members of Armed Forces or the Ordnance factories. The Respondent relied on legal precedents emphasizing strict interpretation of exemption clauses and the requirement to establish clear eligibility for exemption. The Respondent also contested the invocability of the extended period of limitation for demanding duty.

Analysis of Judgment:
The Tribunal analyzed Notification No. 62/95-C.E., which exempts all goods produced in Ordnance factories intended for consumption by the Armed Forces. The Tribunal found that the scrap, although sent to job workers for conversion into strips, was eventually used by the Ordnance factories in manufacturing cups for ammunition consumed by the Armed Forces. The Tribunal disagreed with the Revenue's argument that the scrap was not directly consumed by the Armed Forces or the Ordnance factories. The Tribunal interpreted "All goods" under the notification to include scrap, making it eligible for exemption. Consequently, the Tribunal allowed the appeal filed by the Ordnance Factory, without delving into the question of the extended period of limitation for demanding duty.

This judgment clarifies the scope of exemption under Notification No. 62/95-C.E. for waste and scrap cleared outside the Ordnance Factory, emphasizing the intended consumption by the Armed Forces as the key criterion for eligibility. The decision underscores the importance of interpreting exemption clauses in favor of the taxpayer when the goods are intended for the specified purpose, even if indirectly consumed through a manufacturing process involving job workers.