Internal material handling equipment not capital goods, so exemption under excise notification was denied.

Pallets and trolleys manufactured inside the factory for moving semi-finished and finished goods were held to be internal material handling equipment, not machinery parts or capital goods. Applying the Supreme Court's view, the Tribunal found they had no direct nexus with manufacture of the final product and were not goods used in or in relation to manufacture. They also fell outside the then-applicable definition of capital goods under Rule 57Q. Accordingly, exemption under Notification No. 67/95-C.E. was unavailable and the appeal failed.

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Issues: Whether pallets and trolleys manufactured within the factory and used for movement of semi-finished and finished goods were classifiable as capital goods and eligible for exemption under Notification No. 67/95-C.E. and Rule 57Q of the Central Excise Rules, 1944.

Analysis: The Tribunal followed the Supreme Court's ruling that such pallets are material handling equipment used only to shift goods from one machine to another and are not parts of the machinery with which they are used. It was held that they are not used in or in relation to manufacture of the final product for the purpose of the exemption. The Tribunal also noted that the definition of capital goods under Rule 57Q, as applicable at the material time, did not cover the goods in question.

Conclusion: The pallets and trolleys were not entitled to be treated as capital goods or to exemption under Notification No. 67/95-C.E., and the appeal failed.

Ratio Decidendi: Goods manufactured and used only as internal material handling equipment, without direct nexus to manufacture of the final product, do not qualify as capital goods or as goods used in or in relation to manufacture for exemption purposes.

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