2005 (11) TMI 423 - AT - Central Excise

Summary

Issues:
Interpretation of Notification 64/95-CE for exemption from duty on goods supplied for consumption on board a vessel of the Indian Navy.
Applicability of exemption to goods supplied for ships under construction.
Eligibility for Modvat credit in case of denial of exemption.

Analysis:
The appeals revolve around the interpretation of Notification 64/95-CE regarding the exemption from duty on goods supplied for consumption on board a vessel of the Indian Navy. The department contended that the supply was for ship construction, not for consumption on board, necessitating duty payment on the items, specifically control panels.

The Tribunal referred to a previous case, establishing that the exemption is not applicable to goods supplied for ships under construction, even with a certificate from the appropriate authority. The Tribunal rejected the argument that the certificate should be accepted for exemption eligibility. It was noted that there was no evidence to disprove that the control panels were for ships under construction, a requirement for exemption under the notification. Thus, the respondents were deemed ineligible for the exemption.

However, the Tribunal acknowledged the respondents' claim that the price should be considered as a cum duty price, citing a Supreme Court decision. As a result, the assessees were granted abatement equal to the duty element from the price. Additionally, the Tribunal ruled that the respondents should receive Modvat credit due to the denial of the exemption, subject to verification of duty paying documents.

Consequently, the Tribunal remanded the case for reevaluation of duty liability based on the cum duty price determination and verification of Modvat credit eligibility. The penalty imposed on the respondents was not restored, as the Tribunal deemed it inappropriate in this instance.

In conclusion, the appeals were partly allowed, with the benefit of exemption under Notification 64/95-CE deemed unavailable for the goods in question. The case was remanded for further assessment of duty liability and verification of Modvat credit eligibility, while the penalty was not reinstated.