1997 (7) TMI 382 - AT - Central Excise

Issues Involved:
1. Applicability of Notification 431/86 for exemption of excise duty on Caisson Gate.
2. Interpretation of the term "used in the manufacture or repair of goods" under the Notification.
3. Relevance of judicial precedents cited by the appellant.

Detailed Analysis:

1. Applicability of Notification 431/86 for exemption of excise duty on Caisson Gate:
The primary issue in the appeal pertains to the benefit of Notification 431/86, which exempts goods manufactured in a shipyard intended for use in the manufacture or repair of goods falling under specific headings from excise duty. The appellant's item, Caisson Gate, is classifiable under Heading 89.07, which is included in the Notification. The appellant contends that the Caisson Gate is used in the manufacture of goods in the shipyard and thus should be eligible for the exemption.

2. Interpretation of the term "used in the manufacture or repair of goods" under the Notification:
The appellant argues that the term "used" should be interpreted broadly to include any item that facilitates the manufacturing or repair operations within the shipyard. The appellant cites the Supreme Court judgment in Rajasthan State Chemical Works v. C.C.E., which held that operations integrally connected with the manufacture of a finished product should be considered as part of the manufacturing process. The appellant also refers to the High Court of Orissa's judgment, which elaborates on the term "use" as employing an item for a given purpose, even if it does not undergo a noticeable change.

3. Relevance of judicial precedents cited by the appellant:
The appellant relies on several judicial precedents to support their interpretation of the term "used." They cite the Tribunal's decision in M.M. Forgings, where it was held that handling equipment like Fork Lifts could be considered as part of the manufacturing process if essential for production. They also refer to the Cochin Port Trust case, which dealt with the concept of factory premises and the use of goods manufactured within the same factory for repair and maintenance.

Tribunal's Analysis and Conclusion:
The Tribunal considered the arguments and precedents cited by both sides. It observed that the Notification's wording specifies that the goods must be "used in the manufacture or repair of other goods" falling under specific headings. The Tribunal noted that while the term "used" can have a broader interpretation, the context of the Notification must be considered. The Supreme Court's judgment in Rajasthan State Chemical Works emphasized that an operation must be integrally connected with the manufacture of goods to be considered part of the manufacturing process.

The Tribunal found that the Caisson Gate's function is to isolate the dock from the sea, providing a dry environment for ship repair. This function is structural and not integrally connected with the manufacturing process of the goods specified in the Notification. The Tribunal distinguished the present case from the precedents cited, noting that the Caisson Gate's use does not directly contribute to the manufacture or repair of the specified goods.

The Tribunal concluded that the benefit of the Notification is only available for goods directly used in the manufacture or repair of specified goods and not for items like the Caisson Gate, which provide a structural function. Therefore, the appeal was dismissed, and the exemption under Notification 431/86 was not granted to the Caisson Gate.

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