2006 (12) TMI 355 - AT - Central Excise

Summary

Issues:
1. Benefit of Notification No. 64/95-C.E. dated 16-3-95 as amended.
2. Classification of the engine as stores for consumption on board a vessel.
3. Direct supply to the Indian Navy requirement.

Analysis:
1. The appellants were required to pre-deposit a specific amount based on the impugned order related to the benefit under Notification No. 64/95-C.E. The appellant, engaged in manufacturing IC Engine and D.G. sets, had supplied an engine to M/s. Garden Reach Shipbuilders and Engineers Ltd. for use by the Indian Navy. The original authority accepted the certificate provided by the appellant, granting them the benefit. However, the Revenue contested this decision, leading to an appeal to the Commissioner (Appeals) who ruled against the appellants, citing the supply to a different entity than the Indian Navy as the reason for denial of benefits.

2. The Tribunal, upon reviewing the case records, concluded that the engine in question fell under the category of "stores for consumption on board a vessel." The term "stores" was interpreted broadly to include not only consumables for human use but also machinery spares required on a ship. Referring to Section 2(38) of the Customs Act, 1962, which defines "stores" as goods for use in a vessel, the Tribunal emphasized that the objection regarding direct supply to the Indian Naval Vessel lacked merit. The appellant's explanation that the engine was initially sent to Garden Reach workshop for testing before being cleared to the Indian Navy, supported by the certificate, was deemed sufficient evidence. Consequently, the Tribunal found that the appellant had a strong case in their favor and ordered the waiver of the pre-deposit of duty until the appeal's disposal.

3. The issue of direct supply to the Indian Navy was crucial in determining the applicability of the benefit claimed under the notification. The appellant's argument that the engine was eventually intended for the Indian Navy, despite an initial stop at Garden Reach workshop for testing, was pivotal in establishing the eligibility for the benefit. The Tribunal's decision to consider the factual position and the sequence of events leading to the engine's final destination supported the appellant's contention, leading to the favorable order of waiving the pre-deposit of the duty demanded during the appeal process.