2006 (11) TMI 449 - AT - Central Excise

Summary

Issues:
1. Disallowance of exemption under Notification 6/2002-C.E. for IC engines used in the manufacture of tractors.
2. Interpretation of Note 2(e) to Section XVII of the Central Excise Tariff Act, 1985.
3. Comparison with a previous case regarding benefit extension under a similar notification.
4. Reference to CBEC Circular No. 512/8/2000-CX for clarification on classification and exemption eligibility of parts.

Analysis:
1. The judgment deals with the disallowance of exemption under Notification 6/2002-C.E. for IC engines used in manufacturing tractors. The issue arose due to the application of Note 2(e) to Section XVII of the Central Excise Tariff Act, 1985, which states that machines and apparatus of Heading 84.08 are not considered parts or accessories, regardless of their use in goods falling under Chapters 86 and 87. The appellant contested this disallowance.

2. The Tribunal considered a previous case where a similar benefit extension was granted under Notification 6/2000 for batteries supplied to Airforce stations. The adjudicating authority had rejected the claim based on Note 2(f) of Section XVII, covering electrical machines and equipment. However, the Tribunal extended the benefit in that case, as seen in the decision of High Energy Batteries (I) Ltd. v. CCE, Trichy - 2002 (142) E.L.T. 266. This comparison was crucial in determining the eligibility for exemption in the present case.

3. In light of the above comparison and the reference to CBEC Circular No. 512/8/2000-CX, the Tribunal set aside the impugned order which confirmed a demand of Rs. 21,85,76,175/- and imposed a penalty of Rs. 50,00,000. The circular clarified that goods falling under Chapters other than 86 but used as parts of goods falling under Heading Nos. 86.01 to 86.06 are eligible for exemption under specific notifications, subject to fulfillment of prescribed conditions.

4. Ultimately, following the precedent and the circular's guidance, the Tribunal allowed the appeal, emphasizing the applicability of the previous decision to the facts of the present case. The judgment highlights the importance of correctly interpreting classification notes and circulars to determine the eligibility for exemptions under relevant notifications, ensuring consistency and adherence to legal provisions.

Conclusion:
The judgment provides a detailed analysis of the issues surrounding the disallowance of exemption for IC engines used in manufacturing tractors under Notification 6/2002-C.E. The comparison with a previous case and reference to the CBEC circular were instrumental in overturning the impugned order and allowing the appeal, emphasizing the importance of correct classification and interpretation of legal provisions in such matters.