Naval stores exemption requires verified proof of supply for consumption on board; remand ordered for fresh factual examination.

Exemption under Notification No. 64/95-C.E. depended on proof that goods were supplied as stores for consumption on board a vessel of the Indian Navy, and the existing record did not satisfactorily establish that condition. The show cause case treated the goods as construction material rather than naval stores, so the claimed exemption could not be sustained on the present findings. The certificate issued by the Indian Navy and supporting evidence were not properly verified, and the factual question required fresh examination. The order was therefore set aside and the matter remanded for adjudication after verification of the evidence under the applicable notification.

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Issues: (i) Whether goods supplied to the Indian Navy were eligible for exemption under Notification No. 64/95-C.E. as stores for consumption on board a vessel of the Indian Navy. (ii) Whether the matter required remand for verification of the certificate and supporting evidence produced by the assessee.

Issue (i): Whether goods supplied to the Indian Navy were eligible for exemption under Notification No. 64/95-C.E. as stores for consumption on board a vessel of the Indian Navy.

Analysis: The exemption was conditional upon the goods being supplied as stores for consumption on board a vessel of the Indian Navy. The relevant allegation in the show cause notices was that the goods were construction material and were not issued as stores for consumption on board. Reliance was placed on the principle that the notification contemplated direct supply to the Indian Navy, and that supply through other ports or otherwise would not satisfy the condition.

Conclusion: The exemption could not be upheld on the basis of the existing record, and the contrary factual finding was not sustainable.

Issue (ii): Whether the matter required remand for verification of the certificate and supporting evidence produced by the assessee.

Analysis: The certificate issued by the Indian Navy and other supporting material had not been properly verified at the adjudication stage. The factual question whether the goods were actually supplied as stores for consumption on board required fresh examination by the adjudicating authority in the light of the governing legal test.

Conclusion: The impugned order was set aside and the matter was remanded for fresh adjudication after verification of the evidence.

Final Conclusion: The assessee did not succeed in sustaining the appellate relief, and the dispute was sent back for reconsideration on the exemption claim after factual verification in accordance with the applicable notification and legal standard.

Ratio Decidendi: Exemption under the notification was available only when the goods were shown to have been supplied as stores for consumption on board a vessel of the Indian Navy, and such factual compliance had to be established on verified evidence.

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