Exemption for parts used in intermediate manufacture upheld where notification covered the intended end use.

Electrical stampings and laminations used in making electric motors, which were in turn used in the manufacture of power driven submersible pumps, were treated as eligible inputs for Notification No. 64/86-C.E. The Tribunal reasoned that goods used as parts in the manufacture of an intermediate component of the final product can still qualify for exemption where the notification covers the intended end use. Departmental circulars supported that interpretation. On that basis, the exemption was admissible and the revenue appeal failed.

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Issues: Whether electrical stampings and laminations used in the manufacture of electric motors, which are in turn used in the manufacture of power driven submersible pumps, were entitled to the benefit of Notification No. 64/86-C.E. dated 10-2-1986.

Analysis: The assessee's claim turned on the character of the goods as parts used in the manufacture of a further component of the final product. The Tribunal accepted that parts used in the manufacture of another part of the finished product could still qualify for the exemption where the notification covered the relevant end use. Support was also drawn from the departmental circulars reflecting the same view.

Conclusion: The benefit of Notification No. 64/86-C.E. dated 10-2-1986 was admissible, and the revenue appeal failed.

Ratio Decidendi: Where exempted goods are used as parts in the manufacture of an intermediate component of the final product, the exemption cannot be denied merely because the goods are not directly fitted into the ultimate finished product, if the notification covers the intended end use.

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