Eligibility for Excise Duty Exemption: CESTAT Grants Exemption for Aircraft Parts Supplied to Research Institutions [Read Order]

The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT)grants excise duty exemption under Notification No. 10/97-CE for aircraft parts supplied to research institutions.

Taneja Aerospace and Aviation Ltd,appellant-assessee, manufactures aircraft parts under chapter heading 8803 30 00 of the Central Excise Tariff Act, 1985. The assessee cleared these parts without paying duty under notification 10/97-CE to institutions like M/s National Aerospace Laboratories and M/s Hindustan Aeronautics Limited, based on Excise Duty Exemption Certificates.

The Department argued that the assessee was not eligible for the exemption, as the goods did not meet the criteria. As a result, a show cause notice (SCN) was issued for the period 05/12 to 02/13, though it was not considered in the case. Three Statements of Demand (SOD) were issued for the periods 03/13 to 11/13, which were adjudicated, confirming the demand.

The assessee appealed to the appellate authority, which upheld the duty demand of Rs. 6,92,523/- with interest, but reduced the penalty to Rs. 2 lakhs. The assessee then filed Appeal No. E/40474/16 before the Tribunal.

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For the period 12/13 to 10/14, a new SOD was issued, and the Commissioner confirmed the demand of Rs. 57,60,50,326/- with interest and imposed a penalty of Rs. 5,75,033/-.

The two member bench comprising Ajayan T.V(Judicial Member) and Vasa Seshagiri Rao(Technical Member) reviewed the case and found that Notification No. 10/97-CE dated 01.03.97 exempts certain goods from excise duty when supplied to public-funded research institutions, with specific conditions.

It was clear that the goods were used for research and the exemption certificates were valid. The Department denied the exemption, saying the goods didn’t qualify under the notification. The assessee argued that the goods were for research and provided certificates from institutions like M/s Aeronautical Development Establishment and M/s Hindustan Aeronautics Limited to prove this.

The appellate tribunal agreed that the certificates confirmed the goods were for research. Since the Department did not provide any evidence to prove otherwise, it concluded that the exemption should apply and the Department was wrong to deny it.

The CESTAT noted that the Central Board of Excise and Customs clarified in a letter dated 29.02.2016 that engineering goods, including switchboards, electrical motors, and automation products, are covered under Notification No.10/97-C.E., provided other conditions are met.

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The assessee submitted certificates from government-funded research institutions like M/s Aeronautical Development Establishment and M/s Hindustan Aeronautics Limited. The tribunal criticized the denial of exemption, stating it hindered the supply of goods to essential research institutions.

The bench pointed out that public-funded research institutions under DRDO or similar departments only need to provide a certificate confirming their status, without needing to prove the goods are for research purposes. The Department could not deny the exemption without evidence that the goods didn’t meet the notification’s requirements.

Read More: Aircraft classified as Engineering Goods Eligible for Excise Duty Exemption: CESTAT

The tribunal also referred to its earlier decision in the appellant’s case, where it had ruled that aircraft parts qualified as "engineering goods" and were eligible for exemption. It concluded that the denial of exemption was unjustified and set aside the order.

In short,the appeal was allowed.

To Read the full text of the Order CLICK HERE

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