Exemption under clarificatory circulars upheld for suppliers to BEML-linked defence manufacture; demand and penalty failed.

Departmental circulars and a Ministry of Finance letter were treated as clarificatory of Notification No. 63/95-C.E., extending exemption to job workers and vendors supplying inputs required by BEML for manufacture of goods ultimately supplied to the Ministry of Defence. The earlier Tribunal view was that such circulars bind the department, and the Revenue's reliance on later Supreme Court rulings did not displace that position on the facts or under a different notification. The exemption was therefore available to the supplier, and the demand and penalty could not be sustained.

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Issues: Whether the appellant was entitled to exemption under Notification No. 63/95-C.E. for gear boxes supplied through BEML for manufacture of goods supplied to the Ministry of Defence, and whether the departmental circulars/letters supporting such exemption were binding.

Analysis: The notification was read in the light of the Board's circulars and the Ministry of Finance letter, which clarified that the exemption would extend to all job workers and vendors supplying inputs required by BEML for manufacture of finished goods supplied to the Ministry of Defence. The earlier Tribunal view favouring the assessee had relied on the principle that such circulars are binding on the department. The reliance placed by the Revenue on later Supreme Court decisions was found not to dislodge the assessee's claim, as the cited decision on non-binding effect of contrary circulars did not assist the Revenue in the present facts and the other cited exemption case related to a different notification.

Conclusion: The appellant was eligible for the exemption and the demand and penalty could not be sustained.

Final Conclusion: The appeal succeeded and the assessee obtained the claimed excise exemption benefit.

Ratio Decidendi: Where departmental circulars and clarificatory letters extend an exemption to a covered class of suppliers, the department must give effect to that clarification unless the governing notification or applicable law clearly excludes the benefit.

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