2008 (8) TMI 150 - AT - Central Excise

Aluminium castings - aluminium castings, out of which the finished goods were manufactured were cleared to the vehicle factory of the Defence Ministry - marketing of these castings and even transfer of information about the same to other persons were forbidden under the agreement between the appellants and the Defence Ministry - marketability of the castings not established by department - any duty of excise was not leviable thereon as rightly held by the original authority

Summary

Issues:
1. Duty liability on aluminium castings used in the manufacture of spring brake chambers for the Ministry of Defence.
2. Interpretation of Notification No. 67/95-C.E. regarding duty exemption.
3. Admissibility of duty exemption based on marketability of goods.

Analysis:
1. The appellants manufactured spring brake chambers for the Ministry of Defence using aluminium castings as an intermediate product. The castings were captively consumed in the final product without duty payment. The department demanded duty on the castings, contending that duty exemption under Notification No. 67/95-C.E. was not applicable as the final products were already duty-free. The appellants argued that the castings were not marketable, citing an agreement with the Defence Ministry restricting their sale or disclosure, which was acknowledged by the adjudicating authority. Consequently, the duty demand was dropped initially.

2. The department appealed the decision, leading to a review by the appellate authority who upheld the duty demand on the castings. However, in the subsequent appeal to the Appellate Tribunal CESTAT, it was reiterated that the castings were specifically designed for Defence Ministry's spring brake chambers and were not suitable for private vehicle manufacturers. The agreement between the appellants and the Ministry prohibited marketing or disclosure of the castings under the Official Secrets Act. Considering these factors, the Tribunal concluded that the castings were not marketable goods, thus duty was not leviable on them as per the original authority's decision.

3. The Tribunal set aside the appellate authority's order, allowing the appeal of the appellants. It was emphasized that the aluminium castings, due to their specialized nature and confidentiality agreement with the Defence Ministry, were not capable of being marketed. Therefore, the duty liability on the castings was deemed inapplicable, affirming the original authority's decision and providing relief to the appellants in this matter.