2000 (9) TMI 451 - AT - Central Excise

Summary

Issues Involved:
1. Classification and exemption eligibility of battery parts under Notification No. 68/86.
2. Difference between storage batteries and stationary batteries.
3. Compliance with Chapter X procedure of the Central Excise Rules, 1944.
4. Interpretation of Notification No. 68/86 regarding parts of batteries.

Issue-wise Detailed Analysis:

1. Classification and Exemption Eligibility of Battery Parts under Notification No. 68/86:
The appellants, manufacturers of battery containers and lids, claimed exemption under Notification No. 68/86, dated 10-2-1986, which provided a nil rate of duty for parts of storage batteries under heading 8507. The department issued a show cause notice as the parts were removed in contravention of Chapter X procedure and used in the manufacture of stationary batteries at another manufacturer's premises. The benefit of the Notification was denied, and demands were confirmed for the period 4/89 to 12/89. The Collector (Appeals) upheld the Assistant Collector's order, confirming the demand.

2. Difference Between Storage Batteries and Stationary Batteries:
The Collector (Appeals) differentiated between storage batteries and stationary batteries, referring to various sources like Encyclopaedia Britannica and the Harmonized Commodity Description and Coding System. Storage batteries are used to store electricity and supply it when required, involving a cycle of charging and discharging. Stationary batteries, on the other hand, are used for standby emergency power in places where cessation of electric service would be disastrous, such as hospitals and telephone exchanges. The Collector concluded that the Government intended to allow exemption only for parts of stationary batteries, provided certain procedures were followed.

3. Compliance with Chapter X Procedure of the Central Excise Rules, 1944:
The appellants argued that they had substantially followed Chapter X procedure. However, it was found that parts of storage batteries were removed to another manufacturer's premises for the manufacture of stationary batteries, which was not in compliance with the procedure required for claiming exemption under Notification No. 68/86.

4. Interpretation of Notification No. 68/86 Regarding Parts of Batteries:
The Notification exempts parts of storage batteries if used in the factory of production for manufacturing storage batteries. The Collector (Appeals) found a clear distinction between storage batteries and stationary batteries. The appellants' argument that both types of batteries were practically the same was not supported by any substantial evidence. The Notification's strict interpretation did not permit exemption for parts of storage batteries used in stationary batteries. The submission that parts were used in the manufacture of stationary batteries and cleared at nil rate of duty was not sufficient to grant the benefit under Sl. No. 5 of the Notification, which specifically pertains to parts of stationary batteries.

Conclusion:
The Tribunal upheld the Collector (Appeals)'s order, confirming that parts of storage batteries used for manufacturing stationary batteries elsewhere than in the factory of production were not eligible for the exemption under Notification No. 68/86. The appeal was rejected, affirming the demand and denial of exemption.