1996 (7) TMI 366 - AT - Central Excise

Summary

Issues: Duty liability on spare parts and components under Notification 123/81-C.E. for a 100% Export Oriented Unit.

The judgment pertains to an appeal concerning duty liability on various items brought into a factory of a 100% Export Oriented Unit under Notification 123/81-C.E. The Appellants were granted full exemption on capital goods, components, and raw materials for manufacturing articles, subject to compliance with specified conditions. The dispute centered around spare parts like spare tyre, tubes, and flaps brought into the factory in 1984 and 1985, as well as refractory bricks, castables, mortars, and a railway derailing switch brought in between 1982-1984. The Collector of Central Excise held that the benefit of the Notification did not apply to these items, leading to a demand for duty. The Appellants challenged this decision.

The primary issue revolved around the interpretation of the term "component" under Notification 123/81. The Notification granted total exemption to excisable capital goods, components, and raw materials for approved Export Oriented Undertakings. The Collector contended that the disputed items were used as spare parts for repairs, not as components in building the original plant, thus disqualifying them from the exemption. The Appellants disputed this interpretation, arguing that spare parts should also be considered components under the Notification.

The Tribunal analyzed the definition of "component" as "one of the parts or elements of which anything is made up." It emphasized that spare parts like tyres, tubes, flaps, and the derailing switch, used to replace worn or damaged items, should be considered components under the Notification. The Tribunal rejected the Collector's view that spare parts were distinct from components, stating that spare parts are essentially parts and, therefore, fall within the ambit of components. It highlighted that the Notification aimed to encourage Export Oriented Units by exempting capital goods, components, and raw materials, and thus, the term "component" should be construed broadly.

The judgment further addressed the specific items in dispute. It held that refractory bricks, castables, mortars, and the derailing switch were components falling within the Notification, as they were used in connection with manufacturing articles. The Tribunal disagreed with the Collector's finding that the derailing switch was outside the Notification scope, noting that the railway system served both transportation of goods and raw materials, making the switch a component used in manufacturing. Consequently, the disputed articles were deemed exempt from duty under the Notification.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order. It held that the items brought into the factory were not liable for duty as they qualified for the Notification's benefit. The judgment did not delve into the plea regarding the limitation period under the Central Excises and Salt Act, 1944, as it found the items to be covered by the exemption.