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Issues:
1. Interpretation of exemption under Notification 26/88 for imported equipment. 2. Whether the Surgraphic Recorder is an essential part of the imported equipment. 3. Determining if the Surgraphic Recorder qualifies for exemption as part of the main instrument. Analysis: The appeal challenged the denial of exemption to the Surgraphic Recorder imported along with Surface finish Testing Equipment for the Ball Bearing Industry under Notification 26/88. The appellants argued that the Recorder was indispensable for obtaining accurate results in bearing manufacturing, as confirmed by correspondence from the manufacturer's agent. The Recorder was claimed to be an integral part of the equipment, not optional, and essential for measuring bearing components accurately. The Revenue contended that additional parts enhancing machine versatility were optional and not part of the main instrument. The Tribunal examined the correspondence indicating that the Recorder was included in the complete system ordered, with no separate pricing, emphasizing its necessity for surface checking in the bearing industry. The appellants' purchase order and invoice also confirmed the inclusion of the Recorder as part of the equipment, crucial for precision checking of bearing surfaces. The Tribunal noted that the Surgraphic Recorder was essential for identifying defects like grinding marks during bearing manufacturing, enabling corrective action for producing high-quality bearings. The Recorder provided graphic records crucial for locating defects, enhancing manufacturing precision. Despite the Revenue's argument that the Recorder was an optional accessory, the Tribunal found no evidence supporting this claim. The catalogue clarified that the Recorder was necessary for obtaining permanent graphs of tested profiles, refuting the notion of it being optional. The Tribunal emphasized the importance of graphic records for accuracy in results, concluding that the Recorder was an integral part of the composite machine for precision checking in bearing production. In overturning the Collector's decision, the Tribunal held that the Surgraphic Recorder was an essential component of the imported equipment, integral to the precision checking process for bearing manufacturing. The Tribunal's decision was based on the Recorder's indispensable role in identifying defects and ensuring high-quality production. The Tribunal found no merit in the Revenue's argument that the Recorder was optional, emphasizing the necessity of graphic records for accurate measurements. Therefore, the appeal was allowed, setting aside the previous order and granting exemption to the Surgraphic Recorder as part of the main instrument for checking and measuring bearing components.
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