HYDERABAD ALLWYN INDUSTRIES Vs. COLLECTOR OF C EX

JUDGEMENT

(1.) THIS appeal is directed against the order dated 31-7-1987 passed by the Collector of Central Excise (Appeals), Madras, by which he has upheld the order of the Assistant Collector of Central Excise, Hyderabad IV Division rejecting the refund claim of the appellant for a sum of Rs. 1,90,575/- being the duty paid on 25 consignments of components for motor vehicles cleared by the appellants on 9-4-1986. The appellants are manufacturers of Sakthiman cabs for use in motor vehicles. Under Notification No. 239/86, dated 3-4-1986, these cabs were exempted from payment of Central Excise Duty subject to the condition that it is proved to the satisfaction of the Assistant Collector that the parts are intended to be used as original equipment in the manufacture of vehicles falling under Chapter 87 of the Central Excise Tariff Act, 1985 and manufactured in a Central Govt. Ordnance Factory, and also that in respect of such use elsewhere than the factory of production of the said part the procedure set out in Chapter X of the Central Excises & Salt Act, 1944 is followed. The above Notification dated 3-4-1986 was stated to have been received by the appellants only on 9-4-1986. Meantime on that day the appellants cleared some consignments of cabs to the Government of India Defence Factory at Jabalpur on payment of duty. But on receipt of the Notification No. 239/86, they filed a refund claim on 30-5-1986 on the ground that the goods were cleared as original parts to be used in the manufacture of vehicles in the Govt. Factory at Jabalpur and claiming the exemption under the Notification. The Assistant Collector rejected the claim on the ground that the condition in the Notification viz. following of Chapter X procedure had not been complied with by the appellants. The Assistant Collector's order was upheld in appeal.

(2.) Shri P.S. Subramanian, the learned Consultant appearing for the appellants, submitted that though the exemption Notification was issued on 3-4-1986, they actually received it only on 9-4-1986, the date on which they cleared the cabs on payment of duty and hence they could not follow the procedure under Chapter X. He contended that they have substantially complied with the conditions of the Notification and in this connection he referred to the confirmation dated 23-12-1986 from the Vehicle Factory, Jabalpur, to the effect that they had received the cabins for Sakthiman Trucks supplied by the appellants and that these had been taken into their account. He also submitted that the Vehicle Factory at Jabalpur holds L. 6 Licence as required under Chapter X. In fact they had been clearing these cabs under Chapter X procedure only upto 28-2-1986. With the introduction of Central Excise Tariff Act, 1985, the Cabs fell under Heading 87.07 and the exemption Notification dated 3-4-1986 had not been received by them till 9-4-1986 and hence they had cleared the goods on payment of duty. Their failure to clear the goods under CT. 2 Certificate under cover of AR. 3A assessment document is only a technical failure. There was also no loss of revenue as the goods were actually entitled to exemption on the date of clearance. He also placed reliance upon a Special Bench order in the case of Friends Enterprises, Jamshedpur v. Collector of Central Excise, Patna, where the Tribunal had condoned the non-production of CT. 2 Certificate and L-6 Licence and ordered grant of refund in similar case.

(3.) WE have given careful consideration to the submissions made by the learned Consultant and the learned S.D.R. The question is whether the failure by the appellants to follow Chapter X procedure would be fatal to their refund application. Examining this issue, it is seen that the Notification No. 239/86 stipulates two conditions that an officer of the rank of Assistant Collector should be satisfied that the parts are intended to be used as original equipment parts in the manufacture of inter alia vehicles falling under Chapter 87 of the Central Excise Tariff Act, 1985 and manufactured in an ordnance factory. The second condition is that in respect of such use elsewhere than the factory of production of the parts, procedure set out in Chapter X of the Central Excise Rules, 1944 is followed. As regards the satisfaction of the Assistant Collector about the intended use of the parts as original equipment in the manufacture of vehicles in a Central Govt. Ordnance Factory, it is seen that the Assistant Collector in his order-in-original has given in para 6 of the order a clear finding,