By TIOL News Service

MUMBAI, MAY 02, 2016: THE appellant claimed exemption in terms of Notification 10/97-CE dated 01.03.1997 in respect of clearances air conditioning and refrigeration equipment to central government customers operating under the control of Ministry of Defence i.e. Research & Development Organisations namely, Vehicle Research & Development Establishment (VRDE), Ahmednagar and the Electronic & Radar Development Establishment (LRDE), Bangalore. These establishments were undertaking research and development work on containerized operation theatre complexes for field operations for the Defence Forces. The equipment was supplied by the appellant on the basis of the certificates given by the Head of the Division of the concerned organisation.

A SCN came to be issued seeking denial of the exemption on the ground that air conditioners are not used for scientific and research purposes ; moreover the appellants have not complied with the conditions of Notification 10/97-CE dated 01.03.1997.

Both the lower authorities denied the benefit of exemption and, therefore, the appellant is before the CESTAT.

The appellant inter alia submitted that the Commissioner (A) had failed to appreciate letter dated 21.02.1999 received from the CQAE, Controller of Quality Assurance & Engineering Equipment which indicated that the original AC systems had failed the approval tests and had to be re-engineered to meet the Defence requirements; that the respondent had failed to appreciate that the standard products failed and the AC systems had to be redesigned for the specialized operations more suited for the defence forces; that the eligibility certificates were issued by the customers who are R&D establishment of the Ministry of Defence, Government of India; that the appellant did not suppress any information from the department. They also relied on the following decisions Godrej Appliances Ltd. - 2008-TIOL-2847-CESTAT-AHM & Sunbeam Appliances - 2011-TIOL-697-CESTAT-MUM in support.

The AR reiterated the stand of the department assisted by the decisions in H & R Johnson India Ltd. - 2008-TIOL-2661-CESTAT-MUM ; Sudhir Engineering Co. - 2003-TIOL-201-CESTAT-DEL.

The Bench observed -

+ We find that in order to claim general exemption 10/97 the following conditions need to be fulfilled.

a) Public funded research institution b) Institution is registered with the Government of India c) The goods shall be scientific and technical instruments d) The goods are requirement for research purposes only

e) Produced the certificate by the competent authority.

In this case, the appellant have complied with all the above stated conditions. + We also find that the AC system are specially designed and modified for use in specialized mobile operation theatres for use by the Indian Army in the field.

+ We are of the considered opinion that the appellant are entitled for the exemption under Notification 10/97 dated 01.03.1997 because the institution to whom the appellant has supplied the goods is a public sector institution and they have also furnished the requisite certificate and they are not engaged in any commercial activity and the said goods are required for research purposes.

Concluding that the impugned order was not sustainable in law, the same was set aside and the appeal was allowed with consequential relief.

(See 2016-TIOL-1046-CESTAT-MUM)