By TIOL News Service

MUMBAI, AUG 25, 2017: THE appellant is engaged in the manufacture of P.D. Pumps and avail CENVAT credit.

P.D Pumps are supplied to Indian Navy claiming Exemption notification 10/97-CE dated 01.03.1997, 3/2004-CE etc.

It is the case of the department that since part of the supplies were made claiming exemption notification 10/97-CE, they are required to pay 8%/10% of the total price in terms of Rule 6(3)(a)/Rule 57AD of CER.

Demand notice was issued and confirmed by the original authority which order was upheld by the Commissioner(A).

Aggrieved, the appellant is before the CESTAT and makes the following submissions -

++ Amount of 8%/10% is payable on the exempted goods only in case where at the time of manufacture there are two categories of manufactured goods, one is dutiable and other is exempted. In the present case, they are manufacturing P.D. Pump, which is dutiable.

++ Notification 10/97-CE and Notification no. 3/2004-CE are end use based exemption, accordingly, since goods are supplied to particular category of buyer, in the present case Indian Navy, the goods are exempted otherwise goods i.e P.D.Pumps is dutiable per se, therefore, Rule 57CC/57AD and Rule 6(3)(a) have no applicability and accordingly demand is not sustainable.

Reliance is placed inter alia on the following decisions Tanfac Industries Ltd. - 2010-TIOL-1299-CESTAT-MAD, M/s Rashtriya Chemicals & Fertilizers Ltd. - 2017-TIOL-968-CESTAT-MUM], Chandrapur Magnet Wires (P) Ltd. - 2002-TIOL-41-SC-CX.

The AR while reiterating the findings of the lower authorities submitted that at the time of receipt of inputs and manufacture of the goods, it was known to the appellant that the input is going to be used in the manufacture of P.D.Pump, which are meant for clearance under Notification no. 10/97-CE, therefore, exempted goods were also manufactured by the appellant along with dutiable goods, therefore, Rule 57CC/57AD and Rule 6(3)(a) clearly applicable and appellant are liable to pay 8%/10% of the value of such exempted goods. [Nicholas Piramal (India) Ltd. - 2009-TIOL-649-HC-MUM-CX, M/s Mahindra Sona Ltd. [ 2016-TIOL-1174-CESTAT-MUM] relied upon]

The Bench observed -

"5. I find that the appellant have manufactured P.D.Pump, which is per se not exempted goods. However, they have cleared part of their manufactured goods i.e P.D.Pump under Notification no. 10/97-CE and 3/2004-CE where supplies made to Indian Navy. In the judgments relied by the ld. Counsel, the very same issue has been considered and it was held that at the time of manufacture of final product, it was excisable, therefore, Rule 6(3) will not be applicable."

After extracting the ratio of the decisions cited by the appellant, which the Bench observed dealt with the impugned notification, the case laws cited by the AR were distinguished on the ground that in none of the case laws the issue of exemption notification which is end use based exemption was dealt with.

The impugned order was set aside and the appeal was allowed with consequential relief.

(See 2017-TIOL-3087-CESTAT-MUM)