2017 (12) TMI 546 - AT - Central Excise

N/N. 65/1995 dated 16.03.95 - tools manufactured remain with the appellant even after recovering the cost of the tooling. Thus, the tooling so removed never come out from the factory of the appellant - Held that - identical issue has come up before the Tribunal in the case of Ozla Plastooraft (P) Ltd. and Sh. Manjeet Singh Director Vs. CCE, Delhi-II 2016 (4) TMI 279 CESTAT, New Delhi , where it was held that only criteria for grant of exemption is the capital goods manufactured in a factory are used within the factory of production - the condition of notification fulfilled - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty liability on tools manufactured and captively used by the appellant.
2. Interpretation of Notification No. 65/1995 regarding non-payment of duty.
3. Application of exemption for captive consumption of capital goods.
4. Relevance of ownership of goods in granting exemption.
5. Sustainability of penalties imposed based on the duty demand.

Analysis:
The appeal was filed against the order-in-original passed by the Commissioner, Central Excise & Service Tax, Alwar, concerning the duty liability on tools manufactured by the appellant. The appellant, engaged in manufacturing articles of iron and steel, claimed the benefit of Notification No. 65/1995 for non-payment of duty on tools used in motor vehicles. The department, however, demanded duty on the tools, leading to the appeal.

During the hearing, the Tribunal referred to a previous case where it was established that duty liability on tools used within the factory for production could not be denied, irrespective of ownership. The key criterion for granting exemption was the usage of capital goods within the factory of production. The Tribunal emphasized that the demand for duty on tools was not sustainable, as the tools were not cleared out of the appellant's unit, meeting the conditions for exemption.

Based on the precedent and the satisfaction of the exemption conditions, the Tribunal set aside the impugned order and allowed the appeal. The decision highlighted that penalties imposed on the duty demand were also deemed unsustainable. Consequently, the appeal filed by the appellant was allowed, providing relief in the matter of duty liability on the tools manufactured and used captively within the factory.