JUDGMENT
1. This petition seeks to quash an order passed by the Assistant Collector of Central Excise on 15th January, 1981 granting approval to a classification list filed by the 1st petitioners but without allowing them the benefit of the exemptions granted by exemption notifications 119 of 1975 and 118 of 1975.
2. The 1st petitioners manufacture pipes. They entered into an agreement with the Municipal Corporation of Greater Bombay for fabricating RCC pipes. The Corporation supplied to the 1st petitioners cement and MS wire free of charge; the 1st petitioners fabricated the RCC pipes by using the cement in concrete and by embedding the MS wire, and they forwarded the pipes to the Corporation.
3. The 1st petitioners at their factory manufactured spare parts and equipment used in the manufacture of pipes and in the repairs of their machinery. They also manufactured machines which in turn were used as parts of other machinery used for the manufacture of pipes.
4. The 1st petitioners filed the said classification list with the excise authorities. In respect of the work done for the Corporation, covered by item 6 of the classification list, the petitioners claimed exemption under the said notification 119. Items 7(a) and (b) of the classification list covered the following :
“7. Machinery parts intended to use in our factory & our branches, i.e., all
(a) types of spares and equipment for hume pipes, pre-stressed pipes, steel pipes, manufacturing machineries.
(b) all types of machineries for manufacturing of hume pipes & pre-stressed pipes.”
In respect thereof the petitioners claimed exemption under the said notification 118. Attached to the classification list was a detailed list of articles under items 7(a) and (b).
5. The Assistant Collector noted in the impugned order that the petitioners had not appeared for a personal hearing. As regards item 6 of the classification list the Assistant Collector held that, since the 1st petitioners were not returning the articles received by them from the Corporation and distinctly new items emerged out of the manufacturing process undertaken by them, they were not entitled to the benefit of the said notification 119. In respect of item 7(a) and (b) of the classification list the Assistant Collector held that the petitioners were not entitled to the benefit of the said notification 118 “in view of the second proviso to the aforesaid notification.”
6. Notification 119 has been interpreted by this court in Nobel Paints & Varnish Company Pvt. Ltd. v. Union of India 1985 (19) ELT 80. Following the judgment of a Division Bench of the Gujarat High Court in Anup Engineering Ltd. v. Union of India 1978 ELT 533, it was held that this notification would apply in the case of job work even if the end product of the manufacturing process was different from the material used at its commencement. The order of the Assistant Collector, in so far as it places a different interpretation on this notification must, therefore, be set aside.
7. There are many articles covered by items 7(a) and (b) of the petitioners’ classification list. The Assistant Collector ought to have considered each article thereof in relation to the conditions of the exemption granted under the said notification 118, even though he was deciding ex-parte. Having failed to do so, his order in so far as it deals with the exemption claimed for articles under items 7(a) and 7(b), must also be set aside.
8. There does not appear to be any difficulty about interpreting the said notification 118, which reads thus :
“Exemption to goods used in the factory of production or in any other factory of the same manufacturer. – In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the notification No. 58/75-C.E., dated 1-3-1975, the Central Govt. hereby exempts goods falling under item no. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in a factory and intended for use in the factory in which they are manufactured, or in any other factory of the same manufacturer, from the whole of the duty of excise leviable thereon :
Provided that where such use is in a factory of a manufacturer, different from his factory where the goods have been manufactured, the exemption contained in this notification shall be allowable subject to the proper officer being satisfied that the goods are intended for such use :
Provided further that nothing contained in this notification shall apply to complete machinery manufactured in a factory and meant for producing or processing any goods, even if they are intended for use in the same factory in which they are manufactured or in any other factory of the same manufacturer.”
9. Goods manufactured in a factory which fall under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, are by virtue of the said notification 118, exempted from the excise duty leviable thereon when they are intended to be used in the factory in which they are manufactured or in any other factory of the same manufacturer. Where such use is to be made in a factory other than the factory in which the goods have been manufactured, the exemption is allowable upon the proper officer being satisfied that the goods are intended for such use. The exemption is not applicable to machinery which is manufactured in a factory which is complete and which is meant for producing or processing any goods, even if such goods are intended to be used in the same factory or in any other factory of the same manufacturer.
10. The Central Excise Tribunal, New Delhi, has in the case of National Organic Chemical Industries Ltd. v. Collector of Central Excise, Bombay – 1984 (17) ELT 465, held that the word “use” in the first paragraph of the said notification 118 amounts to “using up” or “consumption” and does not mean a use which can be repeated, but which must result in the article losing its utility as such article. This does not appear to me to be a valid interpretation. The goods that referred to are goods which are to be used in the factory in which they are manufactured or in any other factory of the same manufacturer. They may be so used as inputs, as the tribunal suggests, or as a part of machinery or as spares. There is nothing in the said notification 118 to indicate that the use must be such as cannot be repeated or that it must be such as results in loss of further utility as such article.
11. The order of the Assistant Collector of Central Excise dated 15th January, 1981 is, accordingly, set aside in so far as it denies to the petitioners the benefit of the exemptions given by the said notifications 119 and 118. The Assistant Collector shall afford to the petitioners a hearing after adequate notice before passing a fresh order. He shall consider whether the articles within item 6 of the petitioners’ classification list are entitled to the benefit of the exemption given by the said notification 119 in the light of the interpretation of that notification by this court. He shall also consider whether the articles within items 7(a) and (b) of the petitioners’ classification list are entitled to the benefit of the exemption given by the said notification 118 in the light of the interpretation placed upon that notification in this judgment.
12. No order as to costs.
13. Rule accordingly.