Full Judgment
The adjudicating authority, therefore, confirmed the above demand of duty. In the appeal filed by the aggrieved party against the order of adjudication of the Assistant Collector, the Collector (Appeals) set aside the order of adjudication and allowed the appeal, holding that the products in question were not covered by Explanation (i) to the Notification. It was against this order of the learned Collector (Appeals) that the Revenue filed the present appeal before the Tribunal.
3. We have carefully examined the orders of the lower authorities and connected records of the case. We have also heard the learned SDR, Shri A.K. Agarwal for the Appellants/Revenue. No one is present for the respondents.
4. The learned SDR has reiterated the grounds of the appeal and has submitted that the gauges and valve checking plates manufactured and cleared by the appellants during the period in dispute were not "inputs" within the meaning of this term in Notification No. 217/86 dated 2.4.1986. He has particularly drawn our attention to the text of Explanation (i) under the Notification, which is extracted below: Explanation--For the purposes of this notification, "inputs" does not include-- (i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products.
The learned SDR has further submitted that measuring and checking of goods during the process of manufacture of the final products was an integral and essential part of the process inasmuch as the quality control of the final products was exercised only through such measurements and checking of goods and such quality control was integrally linked with the marketability of the final products. The learned SDR has therefore submitted that the gauges and valve checking plates used for such measuring and checking purposes were to be considered as machines, equipments, apparatus, tools or appliances used for producing or processing of any goods or for bringing out any change in any substance in or in relation to the manufacture of the final products. In this view of the goods in question, the learned SDR has further submitted, the goods stood excluded from the purview of "inputs" under the above Notification, as per Explanation (i) thereto.
When the goods in question stood so excluded, the exemption from duty under the Notification was not available to them. The learned SDR has therefore prayed for setting aside the order of the Collector (Appeals).
5. The learned SDR has also relied on the decision of the Supreme Court in the case of Collector of Central Excise v. Rajasthan State Chemical Works In manufacturers of lime from coke and limestone and the question was whether the pumping of brine into the salt-pans and the lifting of coke and limestone with the aid of power could be considered to have brought about any change in the raw materials. The Apex Court answered the question in the affirmative. This ruling of the Apex Court, in our view, is not supportive of the appellant's case. It was material handling operations, integrally connected with the manufacturing process, that was under consideration in the case before the Court. In the present case, the issue on hand is whether the measuring and checking activities (using the gauges and valve checking plates) by the appellants during the period of dispute had anything to do with the producing or processing of any goods or with any change in any substance in or in relation to the manufacture of the final products in the appellants' factory. This issue is quite different from the above issue which had arisen before the Apex Court in the case of Rajasthan State Chemical Works inasmuch as the measuring and checking activities on finished products are not analogous to the material handling operations in the process of manufacture of such products. We, therefore, do not find any support to the Revenue's case from the Apex Court's decision in the afore cited case.
6. It is not disputed that the goods in question were falling under Tariff sub heading 9031.00 of the Central Excise Tariff Act during the period of dispute and that goods falling under the said Tariff sub-heading attracted the exemption under Notification No. 217/86 ibid.
The only issue before us is whether the goods in question were covered by the exclusion clause under the Notification. On this issue, we hold, the learned Collector (Appeals) has reached correct finding that the goods were not used in bringing about any change in any substance in or in relation to the manufacture of the final products or for producing or processing of the final products in the appellant's factory. The measuring and checking activities, for which the goods were used, were in no way connected with the producing or processing of the appellant's final products, nor were they used for bringing about any change in any substance. The gauges and valve checking plates were, therefore, not excluded from the purview of the expression "inputs" as per Explanation (i) to the Notification. We, further, approve the reliance placed by the lower appellate authority on the majority order of the Tribunal in the case of Telco v. Collector of Central Excise, Pune .
7. In view of the above discussion and findings, we dismiss the Revenue's appeal.