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2019 (10) TMI 1035 - AT - Central Excise100% EOU - procurement of items duty free under N/N. 53/97-Cus, dated 03.06.1997 read with N/N. 1/95-CE, dated 04.01.1995 - denial of exemption on the ground that the items in question have not been used in connection with manufacture and packing of goods - HELD THAT - Hon ble Apex Court after analysing in the case of COMMISSIONER OF C. EX., ALLAHABAD VERSUS GINNI FILAMENTS LTD. 2005 (2) TMI 116 - SUPREME COURT has held that the exemption notification has to be read strictly so far as the eligibility is concerned - Though the Apex Court decision is rendered in the context of N/N. 123/81-CE, we find that the central issue of nexus has been dealt by the Apex Court. The appellants are eligible for exemption for Radio Modem and are not eligible for exemption for the 3.0 ton air conditioner and the ducting system - appeal disposed off.
Issues:
1. Eligibility for duty exemption on certain items procured by 100% EOU under specific notifications. 2. Nexus between the procured items and the manufacturing process for exemption eligibility. Analysis: 1. The appeal was filed against an Order-in-Appeal seeking to recover duty on specific items deemed ineligible for exemption. The original proceedings were dropped, but the appeal reinstated the duty. The CESTAT, in remand proceedings, allowed exemption for some items but denied it for others, leading to the current appeal. 2. The appellant argued that certain items like the air conditioner and Radio Modem were essential for maintaining specified conditions under the Drugs & Cosmetics Act, 1940, and for production operations. The Radio Modem was crucial for updating production data, while the air conditioner was necessary for the conference room where important meetings took place. 3. The Department contended that items like air conditioners were not directly linked to the manufacturing process, citing a Supreme Court case. The CESTAT examined the nexus between the procured items and the manufacturing process. They found the Radio Modem directly related to production operations and thus eligible for exemption. However, they ruled against the air conditioner and ducting system due to insufficient evidence of their connection to production activities. 4. The CESTAT emphasized the need for a clear nexus between the procured items and manufacturing processes for exemption eligibility. They cited judicial precedents to support their decision, highlighting the importance of strict interpretation of exemption notifications. Ultimately, they granted exemption for the Radio Modem but denied it for the air conditioner and ducting system based on the lack of evidence establishing a direct link to production operations. 5. The judgment concluded by granting exemption for the Radio Modem while denying it for the air conditioner and ducting system, based on the established nexus between the Radio Modem and production operations. The appeal was disposed of accordingly.
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