2010 (3) TMI 1066 - AT - Central Excise

Summary

Issues involved: Denial of benefit of Notification No. 64/95-CE u/s Rule 16(b) of Central Excise Rules for IC Engine supplied to Indian Navy.

In this case, the Appellants were engaged in the manufacture of IC Engine and had cleared the IC Engine to the Indian Navy under Notification No. 64/95-CE. A Show Cause Notice was issued for denial of the notification benefit as the engine was first cleared to their other factory before being supplied to the Indian Navy. The Adjudicating Authority initially dropped the demand, but the Revenue filed an appeal. The Commissioner (Appeal) then denied the benefit of the Notification, leading to the Appellant filing an Appeal against this decision.

The Appellant contended that the IC Engine in question was supplied to the Indian Navy as ship stores, meeting the criteria of the Notification. They argued that the engine was first cleared to their Kolkata unit for testing as required by the Indian Navy before being supplied as ship stores, and provided communications from the Indian Navy confirming the receipt of the engine as ship store. The Revenue, on the other hand, argued that since the engine was not directly supplied by the Ranchi factory to the Indian Navy, the benefit should be denied, citing a Supreme Court decision in support.

The Tribunal found that while one engine was directly supplied to the Indian Navy and the benefit was granted without objection, the dispute arose regarding the second engine, which was first cleared to the Kolkata factory for testing before being supplied to the Indian Navy. The Tribunal noted that the Appellant had two factories, one for IC Engine manufacture and the other for ship building, and that the engine in question was indeed supplied to the Indian Navy as ship stores. The Tribunal distinguished the case cited by the Revenue, emphasizing that in the present case, the engine was ultimately supplied to the Indian Navy as ship stores, even though it was transferred to another unit for testing as a technical requirement. The Tribunal held that the denial of the benefit of the Notification was not sustainable, set aside the impugned Order, and restored the original Authority's decision, thereby allowing the Appeal.