Captive intermediate product exemption for submersible pumps upheld; duty demand and penalty fail on settled Tribunal and Supreme Court view.

Thrust bearing assembly used captively in the manufacture of submersible pumps was treated as eligible for exemption under Notification No. 6/2000, because earlier Tribunal rulings had already accepted the same product position after considering the departmental circular and the product nature, and the Supreme Court had not disturbed that view. On that settled basis, the exemption could not be denied merely by the classification adopted in the notice or order. The corresponding duty demand and penalty were therefore not sustainable, and the impugned order was set aside.

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Issues: Whether thrust bearing assembly used captively in the manufacture of submersible pumps was entitled to exemption under Notification No. 6/2000 dated 01.03.2000, and whether the duty demand and penalty could be sustained.

Analysis: The intermediate product was used in the manufacture of submersible pumps. The same issue had already been decided in favour of exemption in earlier Tribunal decisions, which had considered the departmental circular and the nature of the product. The Supreme Court had also dismissed the Revenue's appeal against that view. Following the settled position, the exemption claim under Notification No. 6/2000 was held to be available.

Conclusion: The assessee was entitled to the exemption, and the duty demand and penalty were not sustainable.

Final Conclusion: The impugned order was set aside and the appeal succeeded in full.

Ratio Decidendi: Where an intermediate product used in the manufacture of exempted submersible pumps is covered by a prior binding decision and the Supreme Court has declined to disturb that view, exemption cannot be denied merely on the departmental classification adopted in the notice or order.

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