Merger objection and Navy stores exemption rejected where goods supplied to ship builders were outside the notification

A merger objection did not bar the Revenue's appeal because the adjudication order covered two distinct parts, one confirmed and one dropped, each giving rise to separate appellate consequences; the appeal against the dropped portion was therefore maintainable. Valves and cocks supplied to ship builders were not covered by an exemption confined to goods supplied as stores for consumption on board an Indian Navy vessel, since the goods were not supplied to the Navy as stores. The exemption was denied, the Revenue succeeded on merits, and the order dropping the demand was set aside.

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Issues: (i) Whether the Revenue's appeal was barred on the ground that the adjudication order had merged in the appellate order passed in the assessee's appeal. (ii) Whether valves and cocks supplied to ship builders were entitled to exemption under the notification applicable to goods supplied as stores for consumption on board a vessel of the Indian Navy.

Issue (i): Whether the Revenue's appeal was barred on the ground that the adjudication order had merged in the appellate order passed in the assessee's appeal.

Analysis: The adjudicating authority had dealt with two distinct parts of the demand, confirming a portion and dropping the remaining portion. Separate appeals arose from those separate outcomes. The order confirming duty merged with the appellate order in the assessee's appeal, while the portion dropping the demand was independently assailed by the Revenue. The objection of merger was therefore not available to defeat the present appeal.

Conclusion: The objection to maintainability failed and the Revenue's appeal was maintainable.

Issue (ii): Whether valves and cocks supplied to ship builders were entitled to exemption under the notification applicable to goods supplied as stores for consumption on board a vessel of the Indian Navy.

Analysis: The exemption was confined to goods supplied as stores for consumption on board a vessel of the Indian Navy. The goods in question were supplied to ship builders and not to the Indian Navy as stores. The notification was similarly worded to another earlier exemption that had already been interpreted to deny benefit in such circumstances, and the same construction applied here.

Conclusion: The goods were not eligible for the exemption and the Revenue succeeded on merits.

Final Conclusion: The appeal was maintainable, the exemption claim was rejected, and the order dropping the demand was set aside in favour of the Revenue.

Ratio Decidendi: An exemption limited to goods supplied as stores for consumption on board an Indian Navy vessel does not extend to goods supplied to ship builders, and a merger objection cannot bar a Revenue appeal where the adjudication order has been separately dealt with in distinct appellate proceedings.

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