Manufacturing Of Aircrafts Parts Covered Under “Engineering Goods”, No Excise Duty Payable: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that excise duty exemption is available on the manufacturing of aircraft parts.

The bench of Sulekha Beevi.C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have observed that the engineering equipment would fall within the items that have been listed for exemption as per Notification No.10/97. The Commissioner (Appeals) has considered the very same issue and allowed the exemption, observing that the goods that are in the nature of parts of aircraft would fall under the category of “engineering goods.”.

Notification No.10/97-C.E. dated 1.3.1997 grants exemption from excise duty to scientific and technical instruments, apparatus, equipment (including computers), and accessories, parts, and consumables supplied to specified institutions, subject to certification issued by the Head of the Research Institution. The goods that are essential for research purposes will be used for the stated purpose only and will not be transferred or sold by the institution for a period of 5 years from the date of installation, and such institutions are registered with the Department of Scientific and Industrial Research (DSIR). Representations have been received seeking clarification as to whether the engineering goods, such as switchboards, switchgear, electrical motors, automation products, etc., are covered within the scope of the said notification. It is clarified that the scope of the exemption under notification No.10/97-Central Excise covers engineering goods also, subject to fulfillment of other conditions prescribed in the notification.

The appellant/assessee is in the business of manufacturing parts of aircraft falling under Chapter 88 of CETA 1985. They cleared the parts of aircraft to M/s. National Aerospace Laboratories, Bangalore, and M/s. Hindustan Aeronautics Ltd., Bangalore, without payment of excise duty by claiming the exemption under Notification No. 10/1997-CE dated. 01.03.1997. It appeared to the Department that the appellant is not eligible for the exemption as per the notification, for the reason that the goods manufactured and cleared by them do not fall under the goods specified for exemption under the notification.

Hence, show cause notice was issued for the period May 2012 to February 2013, proposing to demand duty, interest, and imposing penalties. After due process of law, the original authority confirmed the entire demand along with interest and imposed a penalty. The appellant preferred an appeal before the Commissioner (Appeals), who upheld the demand.

The department contended that the goods manufactured by the appellants, which are parts of aircraft, do not fall under'scientific and technical instruments, apparatus, equipment (including computers), accessories and spare parts of goods and consumables, computer software, compact disc-read-only memory (CD-ROM), recorded magnetic tapes, microfilms, microfiches, and prototypes. The exemption has been denied, alleging that the goods cleared by the appellants are only parts of aircraft and do not meet the specifications prescribed in the notification and are therefore not eligible for the exemption.

The assessee contended that the scope of the notification covers “engineering goods." The appellant has produced certificates issued that the goods were supplied to M/s. National Aerospace Laboratories and M/s. Hindustan Aeronautics Ltd.

The tribunal, while allowing the appeal, held that the appellant is eligible for the exemption as per Notification No. 10/1997-CE.

Counsel For Appellant: S. Durairaj

Counsel For Respondent: Anoop Singh

Case Title: M/s.Taneja Aerospace and Aviation Ltd. Versus The Commissioner of CGST & Central Excise

Case No.: Excise Appeal No.42030 of 2015

Click Here To Read The Order