COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD versus M/S. GINNI FILAMENTS LTD.

Citation: [2005] 2 S.C.R. 137 · Decided: 17-02-2005 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

-I 
COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD 
A 
v. 
MIS GINNI FILAMENTS LTD. 
;FEBRUARY 17, 2005 
[S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.) 
B 
Excise Duty : 
Exemption to goods for I 00% Export Oriented Undertakings (EOUs)-
Eligibility to benefit of exemption under notification no. 123181-CE dated 2n~ C 
June, 1981; as aJnended-Test (j)fparticipation-Held: Assessee, a 100% EOV 
manufacturing filament yarn J1~ime4 exemption in respect of table, chairs, 
A Cs etc. which cannot be said to b~ :"goods" used in manufacture of cotton 
or filament yarn-It failed to prove by evidence the participation of AC sheets 
in manufacture of filament/cotton yarn-Requirement of use or participation D 
of the "goods" in manufacture of products to be exported out of India, was 
not satisfied-Tribunal erred in admitting the claim of assessee for exemption. 
Respondent-assessee is a 100% Export Oriented Unit manufacturing 
filament yarn. It applied under Notification No.123/8l·CE dated 2nd June, 
1981, as amended, to the Competent Authority for removal of certain E 
goods, under form C1-3, from 100% Export Oriented Unit to its factory, 
namely, A.C. Sheets, Air-Conditioners, flush doors, typewriters, storewells, 
tables, chairs, which was granted. 
The department issued show·cause notice calling upon the assessee 
as to why duty should not be recovered from it for not using the goods, F 
cleared under form CT-3 in the manufacture of cotton/filament yarn in 
their undertaking. The assessee submitted that since the competent 
authority had allowed the above goods to be brought into their 
Undertaking from 100% export oriented unit under form CT-3 and since 
the said goods were brought into their undertaking in connection with the 0 
manufacture of combed cotton yarn, the requisite conditions mentioned 
in the notification no. 123/81 stood satisfied and the department was not 
entitled to demand duty. The assessee further submitted that direct 
utilization of the said goods in the manufacture of combed cotton yarn 
(which was an export product) was not necessary in view of the words 
137 
H. 
138 
SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A "in connection with the manufacture" in the said notification. 
The Adjudicating Authority confirmed the show-cause notice holding 
that the assessee had failed to prove that the said goods were used in the 
manufacture of combed cotton yarn. Assessee appealed before CEGAT 
which held that notification no. 123/81 should be given widest possible 
B interpretation and admitted the claim of assessee for exemption. Hence 
the present appeal by the Revenue. 
Allowing the appeal, the Court 
HELD : 1. Notification no. 123/81-CE dated 2nd June, 1981, as 
C amended, gave exemption to goods for "use" in 100% export oriented unit. 
It gave exemption to capital goods, raw materials, components, 
consumables etc. compendiously known as "goods" when brought into the 
undertaking of a licenst!d holder from the 100% expo.rt .oriented unit 
approved by the Board under a certificate in form CT-3 "in connection 
D with the manufacture or' products to be exported out of India. The said 
notification exempted the above goods from payment of basic excise duty · 
and additional excise duty subject to conditions which fu.rther stipulated 
that exemption shall be granted only if the "goods" released from 100% 
export oriented unit.were brought directly in.to the factory of the licensee 
and were "used in the manufacture or' the products" to be exported. 
E Therefore, in the preamble, which deals with remova~ of goods from 100°.(o 
export ori(!nted unit under CT-3 form, there .is use of the words "in 
connection with the manufacture or' which words are wider when 
compared to the words in the conditions for exemption, namely, "used in 
the manufacture or•. Reading the notification in entirety, therefore, two 
F stipulations have to be fulfilled, namely, removal of the ".goods" from 
100% export oriented unit to the factory of the licensee under form CT-
3 and use or participation of the said "goods" in the manufacture of 
products meant for export. (149-F-H; 150-A-B) 
1.2. In the present case, the Tribunal !las emphasized the words "in 
G connection with the manufacture" in the preamble while failing to notice 
the words "used in the manufacture or. in the conditions which indicate 
use or participation of the said "goods" in the manufacture of products to 
be exported Clot of India. This test of participation has t

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