2009 (5) TMI 850 - AT - Central Excise

Summary

Issues:
- Whether zinc ingots supplied to the Indian Navy qualify as ship stores under Notification No. 64/95-C.E.
- Interpretation of the definition of "stores" under Section 2(38) of the Customs Act, 1962.
- Validity of the certificate issued by the Indian Navy regarding the use of zinc ingots.
- Applicability of the exemption under Notification No. 64/95-C.E. to the supplied zinc ingots.

Analysis:

The appeal revolved around the classification of zinc ingots supplied to the Indian Navy as ship stores under Notification No. 64/95-C.E. The appellants claimed exemption under the notification but faced a show cause notice challenging this claim. The Assistant Commissioner initially dropped the proceedings, but the revenue appealed to the Commissioner (Appeals) who set aside the order and ruled in favor of the revenue, prompting the appellants to appeal against this decision.

The main contention from the appellant's side was that the zinc ingots were intended for use on board Indian Navy vessels, supported by a certificate from the Navy. They argued that any violation in the certificate issuance should not shift duty liability to the supplier. The appellant emphasized that the ingots were used in the manufacture of sacrificial anodes, crucial for protecting the hull surface from corrosion on Navy vessels. They criticized the denial of exemption based on the distinction between stores and raw materials, highlighting the practicality of processing items before consumption on Navy vessels.

The revenue, represented by the DR, argued that zinc ingots did not qualify as ship stores as per the definition under the Customs Act, emphasizing the distinction between ship stores and general stores taken on board. They deemed the Navy's certificate irrelevant in this context.

Upon thorough consideration and record examination, the Tribunal analyzed the definition of "stores" under the Customs Act, which includes goods for use in a vessel. The Tribunal noted that the zinc ingots were indeed used in the manufacture of sacrificial anodes for Navy vessels, as confirmed by the Navy's certificate. The certificate's clarity regarding the ingots' specific use on Navy vessels was crucial in determining their eligibility for the exemption under Notification No. 64/95-C.E.

Ultimately, the Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal. The decision was based on the clear indication from the Navy's certificate that the zinc ingots were utilized on Navy vessels, meeting the criteria for exemption under the notification. The Tribunal emphasized the importance of the certificate's accuracy in determining the applicability of exemptions, highlighting the specific use of the supplied items on board Navy vessels as a decisive factor in the judgment.