1994 (5) TMI 114 - AT - Customs

Summary

Issues Involved:

1. Eligibility for duty exemption under customs Notification No. 159/90.
2. Classification of the imported capacitance bridge as "materials" under the notification.
3. Interpretation of the term "materials" within the context of the notification.
4. Applicability of previous legal precedents and judgments.

Issue-wise Detailed Analysis:

1. Eligibility for Duty Exemption Under Customs Notification No. 159/90:

The appellants filed a Bill of Entry for the clearance of four "Capacitance Bridge" units, claiming duty exemption under customs Notification No. 159/90. The department contested this claim, arguing that the capacitance bridge did not qualify as "materials" under the notification. The notification exempts materials required for manufacturing resultant products or for replenishment of materials with identical specifications used in the manufacture of resultant products. The term "materials" includes raw materials, components, intermediate products, or consumables used in the manufacture of resultant products and their packaging or mandatory spares to be exported along with the resultant products.

The Assistant Collector and the Collector both held that the capacitance bridge did not qualify as raw materials, components, intermediate products, or consumables. Instead, it was classified as testing equipment, not used in the manufacture of the resultant products but supplied for testing purposes. Consequently, the benefit of the exemption under Notification No. 159/90 was denied.

2. Classification of the Imported Capacitance Bridge as "Materials" Under the Notification:

The appellants argued that the capacitance bridge was listed in the Advance Licence and DEEC Book, and hence, should be considered as "materials" eligible for duty exemption. They contended that the term "materials" was broad enough to include the capacitance bridge as a component or an attachment necessary for the manufacturing process.

However, the department maintained that the capacitance bridge was not a component but a capital equipment used for testing purposes. The literature and catalog provided by the appellants indicated that the capacitance bridge was used for fast and accurate measurements without disconnection of units, specifically for testing capacitor banks. This supported the department's view that the capacitance bridge was not a part of the manufacturing process but a testing instrument.

3. Interpretation of the Term "Materials" Within the Context of the Notification:

The notification's definition of "materials" includes raw materials, components, intermediate products, or consumables used in the manufacture of resultant products. The appellants argued that the capacitance bridge fell within this definition as it was essential for testing the capacitor banks, thereby becoming a part of the final product.

The department countered that the capacitance bridge did not meet the criteria of being used in the manufacture of the resultant product. It was a testing equipment, used periodically to check the healthiness of the capacitor bank and not an integral part of the manufacturing process. The Tribunal agreed with the department, stating that the capacitance bridge was an independent testing instrument and not a raw material, component, intermediate product, or consumable.

4. Applicability of Previous Legal Precedents and Judgments:

The appellants cited several judgments to support their claim, including the Supreme Court's ruling in Union of India v. Suksha International & Nutan Gems & Another, which emphasized that the benefit given by a policy should not be taken away by a strict interpretation of a beneficial notification. However, the Tribunal found that these precedents were not applicable to the present case. The DEEC Book and the notification clearly stipulated that duty exemption was subject to the provisions of the customs notification, and the appellants had not satisfied these conditions.

The Tribunal also referred to the ruling in Vulcan Engineers Ltd. v. Collector of Customs, where it was held that goods not utilized in the manufacture of resultant products were not eligible for duty exemption. This precedent was deemed directly applicable to the present case, reinforcing the decision to deny the exemption.

Conclusion:

The Tribunal concluded that the capacitance bridge did not qualify for duty exemption under Notification No. 159/90 as it was not used in the manufacture of the resultant products but was a testing equipment. The appeal was dismissed, upholding the department's decision to deny the duty exemption.