Circular No. 48/48/94-CX dated 12/8/94

Subject: Exemption to components of IC engines cleared under Chapter X procedure before the Budget but used after the Budget-Whether exemption applicable

I am directed to say that notification No. 217/85-CE dated 8.10.85 exempted specified component parts of diesel oil operated IC engines intended for use in "the manufacture of such engines from excise duty. Exemption was subject to the procedure set out in Chapter X of the Central Excise Rules, 1944. Similarly, notification No. 112/88-CE exempted specified components for use in the manufacture of diesel oil operated IC engines which themselves were exempt from whole of the excise duty leviable thereon.

2. The above notifications were rescinded as part of the budget changes. A question has been raised as to the levy of excise duty, if any, on the components which were cleared from the factories under Chapter X procedure prior to 1.3.94 but which were not used for the said purpose as on 1.3.94 but used subsequently or still lying with the end users. It seems that in some cases field officers have taken a view that with the rescinding of the aforesaid notifications w.e.f. 1.3.94, the end-user would have to pay excise duty on the components which were received prior to 1.3.94 but still not used for the intended purpose by 1.3.94.

3. The matter has been examined. It is to be noted that the exemption applied at the time of clearance of the goods from the factory of manufacture and the condition of end-use is only a post clearance condition. It is not necessary that the components ought to have been used for the intended purpose before 1.3.94. The end-use condition can be satisfied even later and the benefit of the exemption to the end-users cannot be denied. The only condition is that the components should be proved to be used for the intended purpose viz. for use in the manufacture of diesel oil operated internal combustion engines in the case of components procured under notification No. 217/85-CE. In the case of components procured under notification No. 112/88-CE, the components should be proved to be used in the manufacture of diesel oil operated internal combustion engines which themselves are exempt from the whole of the excise duty leviable thereon. In other words, in so far as notification No. 112/88-CI is concerned, if the components are used in the manufacture of such engines which are exempt under notification No. 1/93-CE the exemption would be applicable even in such a situation.

4. It is requested that the pending cases may kindly be decided accordingly.

Sd/
(Slishil Solanki)
Under Secretary

F.N0.356/67/94-TRU

Presented by eximkey.com