2007 (10) TMI 214 - AT - Central Excise

Mfg. of sulphuric acid & fertilizers - cleared Sulphuric Acid partly on payment of duty & consumed captively - No duty was paid on captive consumption- alleged that the appellants used duty paid inputs Vandadium Pantaoxide on the exempted final product (Sulphuric Acid) - appellants reversed the credit of duty on inputs utilized in mfg. of exempted final product therefore demand u/r 6(3)(b) is not sustainable since there is no relevancy that appellants didn t maintain sufficient inventories

Summary

Issues Involved:
1. Classification of the imported semi-finished spectacle lenses.
2. Entitlement for the benefit of exemption under Notification No. 06/06-C.E., dated 1-3-2006.

Issue-Wise Detailed Analysis:

1. Classification of the Imported Semi-Finished Spectacle Lenses:
The appellant imported semi-finished spectacle lenses classified under Customs Tariff headings 9001 40 90 and 9001 50 00. The Original Authority reclassified them under heading 9001 90 90, considering them as "other optical elements" rather than finished spectacle lenses. The lower authority upheld this classification, noting that the semi-finished lenses required further processing such as grinding, polishing, and cutting before they could be used as spectacle lenses. The Tribunal agreed with this classification, emphasizing that the semi-finished lenses are optically worked blanks and not fully finished lenses, thus fitting the description under heading 9001 90 90.

2. Entitlement for the Benefit of Exemption under Notification No. 06/06-C.E., dated 1-3-2006:
The main issue was whether the semi-finished spectacle lenses were entitled to the benefit of the exemption notification. The lower authorities concluded that the exemption applies only to fully finished spectacle lenses, as the semi-finished lenses are not ready for use without further processing. The appellant argued that the semi-finished lenses should be considered as spectacle lenses under Rule 2(a) of the Rules of Interpretation, as they have already acquired the characteristics of spectacle lenses and are not used for any other purpose. They presented expert opinions and relied on the functional test prescribed by the Apex Court, asserting that the semi-finished lenses are known in trade circles as spectacle lenses.

The learned Departmental Representative countered by stating that the exemption notification must be strictly interpreted, and the clear language of the notification only grants exemption to fully finished spectacle lenses. He cited several judicial decisions supporting the strict interpretation of exemption notifications, including the Supreme Court's rulings in State of Jharkhand v. Ambay Cements and State of Punjab v. M/s. Punjab Fibres Ltd., which emphasize that the benefit of a notification cannot be extended to items not explicitly mentioned.

The Tribunal, after careful consideration, upheld the lower authorities' decision. It noted that the words in the notification are clear and unambiguous, referring specifically to spectacle lenses and not semi-finished lenses. The Tribunal agreed that if the legislature intended to include semi-finished lenses, it would have explicitly stated so in the notification. The Tribunal also referenced previous decisions, such as the case of CCE, Aurangabad v. Forbes Gokak Ltd., which held that semi-finished ophthalmic blanks are not entitled to exemption as they are not yet lenses.

In conclusion, the Tribunal dismissed the appeal, affirming that the semi-finished spectacle lenses do not qualify for the exemption under Notification No. 06/06-C.E., dated 1-3-2006, as they are not fully finished spectacle lenses. The decision was pronounced in open court on 6-12-2007.