Essential processing machinery falls within the exemption proviso exclusion even if it does not itself make the final product

Notification No. 118/75 exempted goods manufactured in a factory for use in that factory or another factory of the same manufacturer, but excluded complete machinery meant for producing or processing goods. The article explains that three items used within a gas manufacturing system were treated as complete machinery because each performed an essential stage in the processing cycle. The fact that they did not themselves produce the final product did not remove them from the proviso, since the exclusion applies to machinery used in producing or processing goods. The items were therefore not entitled to the exemption.

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Issues: Whether the three items manufactured and used within the factory were covered by Notification No. 118/75 or were excluded as complete machinery meant for producing or processing goods.

Analysis: Notification No. 118/75 exempted goods falling under the relevant tariff entry when manufactured in a factory for use in that factory or another factory of the same manufacturer, but the proviso denied the benefit to complete machinery manufactured in a factory and meant for producing or processing any goods. On the admitted functions of the three items, each performed an essential processing role in the gas manufacturing system. The fact that they did not by themselves produce the final product did not take them outside the expression complete machinery, since the proviso is attracted to machinery used for producing or processing goods.

Conclusion: The three items were held to be complete machinery within the proviso and were not entitled to the benefit of Notification No. 118/75.

Ratio Decidendi: Machinery which performs an essential stage in the production or processing of goods is covered by the exclusion for complete machinery under the exemption notification, even if it does not by itself produce the final product.

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