Tractor parts exemption denied where inputs were used first in sub-assemblies, not directly in tractor manufacture.

Exemption under Notification No. 239/86-C.E. was confined to parts of tractors used as original equipment parts in the manufacture of tractors. The appellants procured parts and used them first in making sub-assemblies, which were then cleared as original equipment parts for tractors; because they were not themselves manufacturers of tractors and the parts were not directly used in tractor manufacture, the notification condition was not met. A Board circular on in-factory sub-assemblies did not aid the appellants on these facts, and the cited precedent was treated as inapplicable. The benefit of the exemption was therefore denied.

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Issues: Whether the appellants were entitled to exemption under Notification No. 239/86-C.E. dated 03-04-1986 for parts procured by them and used in the manufacture of sub-assemblies which were thereafter cleared as original equipment parts for tractors.

Analysis: The exemption was available to parts of tractors only if they were intended to be used as original equipment parts in the manufacture of tractors. On the facts found, the appellants were not themselves manufacturers of tractors and the parts procured by them were first used in the manufacture of sub-assemblies, which were then used as original equipment parts. The condition in the notification was therefore not satisfied. The Board circular dealing with in-factory sub-assemblies did not assist the appellants on the facts, and the cited precedent was held inapplicable.

Conclusion: The exemption was not available to the appellants, and the denial of benefit under Notification No. 239/86-C.E. was sustained.

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