Exemption for sub-contractor goods returned to a defence unit for further manufacture and Ministry of Defence supply.

Goods manufactured by a sub-contractor for a notified defence unit and returned to that unit for further processing and eventual supply to the Ministry of Defence fell within Notification No. 184/86, as the Board's clarification protected ancillary units and sub-contractors in such supply chains. The adverse clarification was confined to job workers clearing goods directly on a principal-to-principal basis without returning them to a specified unit. Since the appellant acted as a sub-contractor and the goods were delivered to Bharat Electronics Limited for further manufacture before defence supply, the exemption applied and the duty paid on clearances was refundable.

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Issues: Whether goods manufactured by a sub-contractor for a notified defence unit and sent to that unit for further processing and eventual supply to the Ministry of Defence were entitled to exemption under Notification No. 184/86, and whether the duty paid on such clearances was refundable.

Analysis: Notification No. 184/86 exempted goods manufactured by the specified units for supply to the Ministry of Defence for official purposes. The Board's trade notices clarified that where ancillary units or sub-contractors manufactured goods for one of the specified units and sent them back for further processing, fitting, manufacture or eventual clearance by that unit, the exemption would not be denied. The adverse paragraph of the clarification applied only to job workers clearing goods directly from their own units on a principal to principal basis without returning them to any of the specified units. On the facts, the appellant was a sub-contractor, not a job worker, and the goods were delivered to Bharat Electronics Limited for further manufacture and eventual supply to the Ministry of Defence.

Conclusion: The exemption clarification applied to the appellant and the refund claims were admissible.

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