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of <h1>Appeal dismissed; exemption under Notification No. 217/86-C.E. applies to direct manufacturing inputs, not indirect inputs</h1> <h3>COLLR. OF C. EX., PUNE Versus TATA ENGINEERING AND LOCOMOTIVES CO. LTD.</h3> SC dismissed the appeal and upheld the Tribunal's ruling that the assessees were entitled to exemption from excise duty under Notification No. 217/86-C.E. ... Entitlement to the benefit of the exemption - exemption based on notification's language and intent - Application of exclusion clause in the Explanation of the notification - Whether assessee rightly claimed exemption from payment of excise duty under Notification No. 217/86-C.E., dated 2nd April, 1986 for the period 1986-1995? Held that:- The difference between the exemption and the exclusion lies in the phrases 'used for producing or processing of any goods' and 'goods for bringing about any change in any substance' occurring only in the exclusion. These operative words in the exclusionary clause 'used for producing or processing' and 'bringing about any change in any substance' must mean something less than 'used in or in relation to the manufacture of the final products'. The Tribunal has said that the operative phrases in the exclusion 'indicated direct or immediate use in actual production or processing of goods or bring about any change in any substance'. We agree Some mentioned characteristics. They are, therefore, exempted from payment of excise duty under the 1986 Notification. We can, in the circumstances, conclude that the Tribunal's interpretation was accepted by the Revenue and they are precluded from taking an inconsistent stand now. Appeal dismissed. Issues:1. Interpretation of Notification No. 217/86-C.E. for excise duty exemption.2. Application of exclusion clause in the Explanation of the notification.3. Consistency in Revenue's stand regarding the interpretation of the notification.Analysis:Issue 1: The respondent-assessee claimed exemption from excise duty under Notification No. 217/86-C.E. for manufacturing various items used in their final products. The Tribunal granted the benefit of the notification, which was challenged by the Revenue in this appeal.Issue 2: The dispute centered around the exclusion clause in the notification, which stated that the exemption does not apply to goods used for producing, processing, or bringing about any change in the substance in relation to the manufacture of final products. The Revenue argued that the goods in question were integral to the production chain and fell within the exclusion clause. However, the respondent contended that the exclusion clause only applied to production and processing machines, not other capital goods covered by the notification.Issue 3: The Court noted that the notification's exemption clause had a wider scope compared to the exclusion clause. The Tribunal's previous decision in favor of another assessee on a similar issue was cited, highlighting the Revenue's inconsistency in challenging interpretations of the notification. The Court held that the Revenue's acceptance of the Tribunal's decision in the past precluded them from taking an inconsistent stand now.In conclusion, the Court dismissed the appeal, upholding the Tribunal's decision to grant the excise duty exemption to the respondent-assessee. The Court emphasized the distinction between the exemption and exclusion clauses in the notification, ruling in favor of the assessee based on the specific language and intent of the clauses. The Revenue's inconsistent stance on similar interpretations of the notification was also a significant factor in the Court's decision to dismiss the appeal.
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