Material handling equipment exemption applies to steel trollies used only for storage and internal movement in manufacturing.

Steel trollies used only for storage and internal movement of scooter parts within the factory fell within Notification No. 217/86-C.E. because the exemption covered inputs used in or in relation to manufacture, while the exclusion applied only to machines, plant, equipment or appliances used for producing or processing goods or bringing about a change in substance. As the trollies did not themselves produce, process or transform any goods, they were treated as material handling equipment outside the exclusion clause. The exemption was therefore available to the assessee.

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Issues: Whether steel trollies used for storage and movement of scooter parts within the factory were eligible for exemption under Notification No. 217/86-C.E. dated 02-04-1986.

Analysis: The exemption covered inputs used in or in relation to the manufacture of final products, while excluding only machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing goods or for bringing about a change in any substance. The trollies were used only for storage and internal movement of parts for assembly and did not themselves produce or process any goods or bring about any change in any substance. Material handling equipment of this nature was treated as outside the exclusion clause and squarely within the benefit of the notification.

Conclusion: The exemption was admissible and the issue was decided in favour of the assessee.

Ratio Decidendi: Material handling equipment used only for storage or internal movement of parts in the manufacturing process, and not for producing or processing goods or causing any change in substance, is eligible for exemption where the notification covers inputs used in or in relation to manufacture and excludes only equipment directly used for production or processing.

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