2014 (2) TMI 212 - HC - Central Excise

100% EOU - appellants claimed that cement is capital goods and, therefore, they were entitled to the benefit of duty paid on cement under Notification No. 1/95 - Held that - This Court is inclined to reject the petitioner‟s argument that inputs materials such as cement used for construction of industrial estates or industrial property would fall within the description of capital goods. If the intention of the government was to enable such a wide interpretation, the specific mention of capital power plant and raw materials , dispels the notion. The only exception to the list of articles and goods which have been specifically granted exemption is the reference to captive power plant for which the government intends to provide exemption having regard to the fact that the EOU will utilise the power plant in entirety. Raw material would be primarily eligible to the end product i.e. goods and articles produced for the purpose of 100% export. No other interpretation would be without clear guideline and enable the statutory authority as well as courts to keep increasing the number of articles and goods which have per se no relationship with the manufacturing activities undertaken - Decided against the assessee.

Summary

Issues:
Challenge to order of Central Excise & Gold (Control) Appellate Tribunal dated 11th December 1997 regarding excise duty exemption for cement used in construction activities by a 100% Export Oriented Unit.

Analysis:
The petitioner, a manufacturer of Wool Worsted Yarn, claimed excise duty exemption for cement purchased for construction activities under notification No. 1 of 1995. The Tribunal rejected the claim stating that the notification only covers goods used in manufacturing the export product or packing material, not construction materials like cement. The High Court examined the notification and held that the term "capital goods" did not include cement for construction. The Court emphasized the specific items listed in the notification, like material handling equipment and raw materials, to reject the petitioner's argument. The Court concluded that the government's intention was not to include construction materials under the exemption.

The High Court reviewed the notification No. 1/95 CE dated 04.01.1995 and subsequent amendments, which exempt excisable goods produced in a 100% export oriented undertaking. The petitioner argued that cement should be considered a capital good for construction purposes. However, the Court analyzed the list of exempt items in the notification, which did not include construction materials. The Court highlighted that the exemption was limited to goods directly related to manufacturing or packaging for export purposes, not for general construction activities.

In dismissing the writ petition, the High Court found no fault with the Tribunal's decision. The Court upheld that the notification did not cover cement used for construction activities by the petitioner, emphasizing the specific mention of items eligible for exemption. The Court clarified that the exemption was intended for goods directly involved in manufacturing or packaging for export, excluding general construction materials like cement.