Exemption for export-production goods upheld where equipment was found essential to cultivating, preserving and exporting cut flowers.

Notification No. 136/94-C.E. was construed strictly, but exemption extended to goods in Annexure I when they were essential for production, manufacture or packaging of the notified export product. Applying that test, the transformer, air-conditioning unit, refrigerated truck, diesel generator sets, mobile refrigeration unit and cold storage unit were found necessary for cultivating, preserving, packing and exporting cut flowers by a 100% export oriented unit. The goods were therefore held eligible for exemption, and the Revenue appeals were rejected.

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Issues: Whether the goods in dispute, namely transformer, air-conditioning unit, refrigerated truck, diesel generator sets, mobile refrigeration unit and cold storage unit, were eligible for exemption under Notification No. 136/94-C.E. as goods brought in connection with the production, manufacture or packaging of cut flowers by a 100% export oriented unit.

Analysis: The notification grants exemption only to specified goods covered by Annexure I when brought in connection with the production, manufacture or packaging of articles specified in Annexure II. The majority applied the text of the notification strictly, while also giving effect to the Board's clarification that eligibility depends on the essentiality of the item with reference to the production, manufacture or packaging of the notified export product. On that basis, the majority held that the respondents' activity of cultivating, preserving, packing and exporting cut flowers required the disputed goods for the export process, and that the goods were therefore within the scope of the exemption.

Conclusion: The disputed goods were held eligible for exemption under Notification No. 136/94-C.E., and the Revenue appeals were rejected.

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