Judgment:
1. The issue for determination in these appeals against the order of the Commissioner of Cen.Excise(A), Indore who has upheld confirmation of duty demand of Rs. 21,07,596/- ( raised under 6 show cause notices and confirmed in 2 separate Orders-in-Original) and imposition of penalty of Rs. 30,000/- is the eligibility of construction material viz. rigid polyurethane foam boards, sections and sheets supplied by the appellants herein to the Indian Navy either directly or through procurement agencies of the Navy such as M/s. Vibgyor Trading Company, M/s. Andersons Marine Pvt. Ltd. and M/s. Mazgaon Docks Ltd. to the benefit of exemption under Notification No. 64/95 dated 16.3.95 which exempts all goods other than cigarettes if supplied as stores for consumption on board the vessels in Indian Navy.
2. We have hard both sides. The ground for denial of the benefit of the Notification is that the goods were not supplied directly to the Indian Navy as stores for consumption on board the vessels, is no longer sustainable, in view of the Tribunal's order in the case of Goa Paints & Allied Products v. CCE, Goa [2001(127)E.L.T.489], wherein the benefit was held to be available to paints supplied to shipyards working as contractors for Indian navy and utilised on the body of the naval ships already in existence. The same decision also meets the argument of the Revenue that construction material is not stores for consumption. In the light of the above decision, we hold that clearances effected to the Indian Navy by M/s. Vibgyor Trading Company and directly to the Indian navy are covered by the Notification. The Commissioner's reliance on the Tribunal's decision in the case of CCE, Delhi v. Impreg and Insulations [1999(112)ELT 292] is misplaced as in that case polyester resins supplied to a procurement agency were converted into strips which were then supplied in turn to Indian Navy and in other words, the goods supplied under-went total change during the transit.
Similarly, his reliance upon the Tribunal's decision in the case of CCE, Mumbai v. Moosa Haji Patrawala Private Ltd.[1999(114)ELT 620] in respect of ice cube making cabinets supplied to M/s. Voltas Limited is misplaced as in that case the Tribunal found that the goods have not been supplied to the Navy and in the case of Goa Paints & Allied Products this decision was considered and the Tribunal held that the facts before the lower Authority were not spelt out in the Tribunal's judgment and then took a view that supply to contractors for the Navy were admissible to the benefit of the Notification. As regards supplies made to M/s. Mazgaon Docks Ltd. and M/s. Andersons Marine Pvt. Ltd., the ld.D.R. raises a valid plea that the benefit cannot be extended to vessels which are not yet in existence, as held by the Tribunal in the case of Goa Paints & Allied Products and submits that in the case of same supplies to M/s. Mazgaon Docks Ltd. and M/s. Andersons Marine Pvt.Ltd., there is a doubt on the basis of the certificates of the Navy, where the Indian Navy vessels were not in existence at the time of supply of construction material by the appellants. He, therefore, submits that this aspect is required to be considered afresh in the light of paragraph 16 of the Goa Paints & Allied Products decision.
3. We see substance in this argument. The Authorities below have not considered the issue of eligibility from this perspective. Therefore, while holding that the benefit of exemption under Notification is available to supplies made directly to the Indian Navy and to the supplies made to M/s. Vibgyor Trading Company who in turn supplied to Indian Navy ( as certified by the Navy), we remand the case in respect of supplies to others for fresh decision by the Adjudicating authority in the light of the Tribunal's decision in the case of Goa Paints & Allied products, wherein it has been held that the expression " on board the vessel" occurring at sr.No.3 of the Table to Notification 64/95 refers to a ship already in existence and the benefit of Notification cannot be extended to goods supplied for use in a ship which is under construction. Fresh orders shall be passed after extending reasonable opportunity of hearing to the assessee and re-compute duty liability, if any.
4. In the facts of the case, penalties are not justified and we accordingly set aside the same.