1998 (12) TMI 160 - AT - Central Excise

Summary

Issues:
Interpretation of Notification No. 75/86 dated 1-3-1986 as amended by Notification No. 312/86 dated 20-5-1986 for duty exemption on filter elements; Compliance with Chapter X procedure for intended use in the manufacture of internal combustion engines.

Analysis:
The appeal challenged Order-in-Appeal No. 313/87(B) upholding a demand of Rs. 3,10,909.20 under Section 11A of Central Excises and Salt Act, 1944. The issue revolved around the interpretation of the notification exempting filter elements as parts of motor vehicles for internal combustion engines. The appellants manufactured filter elements, sent them to another unit for assembly into filters, and then dispatched the complete filter assembly to original equipment manufacturers of internal combustion engines under Rule 56B and Chapter X procedures.

The department argued that the notification only exempted filter elements consigned directly to manufacturers of internal combustion engines under Chapter X procedure. The appellants' advocate clarified the change in practice, stating that filter inserts were no longer manufactured. The JDR emphasized strict interpretation of the notification, stating that the filter assembly sent to manufacturers did not qualify for exemption under the notification.

The appellants contended that the filter elements were ultimately used in internal combustion engines, satisfying the notification's conditions. They cited a case law to support their interpretation of "intended for use." However, the Tribunal disagreed with the appellants' arguments for several reasons.

The Tribunal found that the filter elements were not intended for direct use in internal combustion engines but for assembly into filter assemblies. The legislative intent behind the notification was to exempt only filter elements intended for internal combustion engines, which the appellants failed to prove. The Tribunal emphasized the importance of following the Chapter X procedure for intended use in internal combustion engines.

The Tribunal rejected the appellants' arguments about technicalities and distinguished a case law cited by them, stating that the facts were different. The Tribunal concluded that the appellants did not meet the conditions of the notification and dismissed the appeal, upholding the impugned order.

In summary, the Tribunal's decision hinged on the strict interpretation of the notification's conditions regarding the intended use of filter elements in the manufacture of internal combustion engines and the necessity of complying with the Chapter X procedure for duty exemption.