ORDER
U.L. Bhat, J. (President)
1. M/s. Bharat Electronics Ltd. (for short BEL), Bangalore having undertaken manufacture and supply of Guidance system to the Ministry of Defence, Govt. of India, entered into a sub-contract with the appellant for manufacture of “Trishul Launcher Assembly”, a part of Guidance system and spares. Appellant paid duty for clearance of the assembly ‘under protest’ under three Gate Passes, two dated 31-3-1993 and one dated 31-3-1994 and subsequently preferred a refund claim in respect of GPs dated 31-3-1993 and another refund claim in respect of the third GP.
2. Appellant contended that the goods were entitled to benefit of exemption Notification No. 184/86. Two show cause notices both dated 22-3-1995 were issued indicating that benefit of exemption notification would not be available and payment of duty was correct and proposing rejection of the refund claims. Though appellant resisted the notices, the Assistant Commissioner rejected the refund claims. These orders having been confirmed by Commissioner (Appeals), appellant has preferred the present appeal.
3. There is no dispute about the factual position that BEL having undertaken manufacture and supply of Guidance system to the Ministry of Defence gave sub-contract to appellant for manufacture of one of the assemblies used in the manufacture of Guidance system. BEL had not supplied any raw material or components required and the same had been procured by appellant at his own cost and the manufactured assemblies had been delivered by appellant to BEL, clearances having been made on payment of appropriate of duty. The question is whether Notification No. 184/86 applied to these goods?
4. Notification No. 184/86 as amended subsequently reads as follows:-
“In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts all goods, falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), manufactured by the units specified in the Annexure to this notification for supply to the Ministry of Defence for official purposes, from the whole of the duty of excise leviable thereon which is specified in the said schedule.
ANNEXURE
1. Hindustan Aeronautics Limited
2. Bharat Electronics Limited
3. Bharat Dynamics Limited
4. National Instruments Limited, Calcutta.
5. National Aeronautical Laboratory.”
The exemption under notification is subject to the following conditions :-
(1) One or the other of the five units mentioned in the Annexure should have manufactured excisable goods.
(2) The manufacturer of the goods must have supplied to the Ministry of Defence for official purpose.
If these two conditions are satisfied, the benefit of full exemption would be available.
5. Obviously, the exemption notification did not take into consideration the ground reality that the five units referred to in this Annexure to the notification rarely manufactured entire goods and generally gave sub-contract to other units for manufacture of assemblies of the goods ultimately supplied to the Ministry of Defence. Representations were received by the Central Board of Excise & Customs (CBEC) in this behalf and the Board issued a clarification the purpose of which was to enable the said sub-contractors or even job workers under one of the other five units to avail the benefit of exemption. This is seen in Vadodara Collectorate Trade Notice No. 54/92, dated 1-7-1992 and Central Excise Trade Notice No. 53/92, dated 8-7-1992 of the Bangalore Collectorate. The relevant paragraphs of Trade Notices read as follows :-
“The matter has been examined. It is observed that the purpose of Notification No. 184/86 for manufacture by the five units listed in the said notification which are mainly engaged in production and supply of goods to the Ministry of Defence for official purpose, is very clear. When goods are manufactured by other ancillary units and sub-contractors for this purpose, and are sent back to the five units for further processing, fitting, manufacture etc., and for eventual clearance from the five main units, there is no reason for denying them the benefit of this exemption notification.
The position will of course be different if any of the job workers are clearing the goods directly from their units for excise purposes on a principal to principal basis and are not returning the goods for eventual clearance to any of the five units named in the notification.”
6. The lower authorities have taken the view that appellant is a job worker coming within the mischief of the second paragraph of the aforesaid clause. This conclusion is challenged by the appellant. There is no dispute that appellant is a sub-contractor manufacturing one of the assemblies of Guidance system manufactured and supplied by BEL to the Ministry of Defence for official purpose. Using the assembly manufactured and supplied by appellant, BEL conducted other processes of manufacture in order to produce Guidance system for eventual clearance to the Ministry of Defence for official purpose. Thus going by earlier paragraph of the Trade Notice, appellant as a subcontractor manufactured excisable goods for the purpose of enabling BEL to manufacture and supply other excisable goods to the Ministry of Defence for official purpose and sent the assemblies to BEL for further processing or manufacturing etc., and for eventual clearance by BEL. That being so, by virtue of Board’s clarification as seen in the Trade Notice, appellant would be entitled to the benefit of exemption. The second para of the Trade Notice quoted above refers to job workers and appellant is not a job worker. According to the second para, in order to attract the second para, the following conditions should be satisfied :-
(1) The claimant of benefit of exemption should be a job worker.
(2) The job worker clears the goods directly from his unit for excise purpose.
(3) Clearance must be on a principal to principal basis and he should not return and deliver the goods for eventual clearance to any of the five units to the Ministry of Defence.
As the appellant is not a job worker. Appellant has not cleared the goods directly to the Ministry of Defence on any basis much less on principal to principal basis. Appellant delivered the goods to one of the five units for eventual clearances of a further manufactured product by that unit to the Ministry of Defence. It is thus clear that the three conditions stipulated in the second para of trade notice are not satisfied in the instant case. We are therefore of the opinion that benefit of the clarification under notification cannot be denied to the appellant. In the above circumstances, the refund claims would be in order. Appellant has placed before us copy of the certificate dated 17-6-1995 issued by BEL to the effect that appellant has not collected duty from BEL for supply of Launcher Assembly. Hence there is no inhibition against refund being granted to appellant.
7. For the reasons indicated above, we set aside the impugned order and allow the refund claims with the direction to the proper Officer to grant refund of duty paid by appellant on Launcher Assembly. The appeal is allowed accordingly.