Naval stores exemption limited to direct board supplies; penalty sustained for duty-free clearances after prior adverse ruling.

An exemption under Notification No. 64/95-C.E. was confined to goods supplied as stores for consumption on board Indian Navy or Coast Guard vessels; supplies made to a shipbuilder were not treated as direct supplies to those vessels, so the exemption was denied. Continued duty-free clearances after an earlier adverse ruling in the assessee's own matter justified penalty, and the penalty was upheld. The overall result was that both the exemption claim and the challenge to penalty failed.

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Issues: (i) Whether the exemption under Notification No. 64/95-C.E., dated 16-3-1995 was available to goods cleared to a shipbuilder for use in vessels of the Indian Navy or Coast Guard; (ii) Whether penalty was leviable for clearances made without payment of duty after an earlier adverse decision in the assessee's own case.

Issue (i): Whether the exemption under Notification No. 64/95-C.E., dated 16-3-1995 was available to goods cleared to a shipbuilder for use in vessels of the Indian Navy or Coast Guard.

Analysis: The exemption was confined to goods supplied as stores for consumption on board a vessel of the Indian Navy or Coast Guard. Goods supplied to a shipbuilder were not treated as supplies made to the Navy or Coast Guard themselves. A certificate issued by the Indian Navy was held insufficient where the goods were not supplied directly as stores for consumption on board the relevant vessel.

Conclusion: The exemption was not available, and this issue was decided against the assessee.

Issue (ii): Whether penalty was leviable for clearances made without payment of duty after an earlier adverse decision in the assessee's own case.

Analysis: Clearances continued even after the Tribunal had already decided the assessee's own case against it. The subsequent clearances without payment of duty justified imposition of penalty.

Conclusion: Penalty was upheld, and this issue was decided against the assessee.

Final Conclusion: The appeal failed in full, and the denial of exemption as well as the penalty were sustained.

Ratio Decidendi: An exemption for goods supplied as stores for consumption on board naval or coast guard vessels cannot be extended to supplies made to a shipbuilder, and penalty may be sustained where duty-free clearances continue despite an earlier adverse ruling.

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