Defence exemption for job workers: clarification on ancillary units and sub-contractors required fresh consideration of the claim.

Notification No. 184/86 exempted goods manufactured for defence purposes by specified units, and the dispute concerned whether job workers supplying goods to an eligible defence-linked unit could also claim the benefit. The commentary notes that a Chairman's letter had clarified that ancillary units and sub-contractors should not be denied exemption where goods are returned to the named unit for further processing and eventual clearance to the Ministry of Defence. Because the lower authority had not examined the binding nature of that clarification or whether it reflected Board concurrence, the matter was remanded for fresh consideration of the exemption claim in light of the letter and surrounding background.

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Issues: Whether the appellants, being job workers manufacturing goods for a specified defence supplier, could claim the benefit of Notification No. 184/86, and whether the Chairman's letter clarifying the scope of the notification required reconsideration.

Analysis: The notification exempted goods manufactured for defence purposes by the specified units. The appellants' case was that their goods were manufactured for an eligible unit which ultimately supplied them to the Ministry of Defence. A letter issued by the Chairman of the Central Board of Customs & Central Excise had clarified that ancillary units and sub-contractors should not be denied the exemption where the goods were returned to the named units for further processing and eventual clearance. The binding nature of that letter, and whether it reflected the concurrence of the Board, had not been examined by the lower authority.

Conclusion: The order of the lower authority was set aside and the matter was remanded for fresh consideration of the exemption claim in the light of the Chairman's letter and the surrounding background.

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