Per Jyoti Balasundaram :

The above appeals arise out of two separate orders of the Commissioner (Appeals) extending the benefit of exemption from payment of duty to goods supplied as stores for consumption on board a vessel of the Indian Navy in terms of Notification 64/95-CE dated 16.3.1995.

2. According to the department, the supply was for construction of the ships/vessels and not for consumption on board a vessel of the Indian Navy/Coast Guard, as required under the notification and, therefore, the respondents herein were required to pay duty on the items in dispute, viz. control panels.

3. We have heard both sides.

4. We find that in the case of Goa Paints & Allied Products Vs. CCE, Goa, 2001 (43) RLT 247 (CEGAT-Mum.)=2001 (127) ELT 489, the Tribunal has held that the benefit of exemption from payment of duty under Notification 64/95 is not available to goods supplied for ships under construction, even though each supply was covered by a certificate issued by appropriate authority prescribed under a notification. This decision has been upheld by the Supreme Court as seen from 2001 (129) ELT A308. Therefore, reliance by the learned counsel for the respondents on the Tribunal's order in Gem Electro Mechanical Pvt. Ltd. Vs. CC, Calcutta, 1997 (20) RLT 736 (CEGAT-SB)=1997 (93) ELT 141 holding that once the authority mentioned in an exemption notification has given a certificate for eligibility to exemption, the same should be accepted, is misplaced. The further plea raised by the respondents that they did not have an opportunity to dislodge the finding of the Deputy Commissioner that the control panels supplied by them were for ships under construction also cannot be accepted, as we do not find any evidence on record, even before the Commissioner (Appeals), that the control panels were not for ships under construction which was necessary for them to establish that they were covered by the language of the notification. We, therefore, hold that the respondents are not eligible to the benefit of exemption under the relevant notification. However, the submission of the respondents that the price is to be treated as a cum duty price requires to be accepted in the light of the apex court's decision reported in 2002 (49) RLT 1 (SC)=2002 (141) ELT 3 (SC) in the case of Maruti Udyog Ltd. against which a review petition was filed and dismissed as seen from 2005 (179) ELT A102. We, therefore, hold that the assessees are entitled to abatement to the extent of duty element from the price, if this has already not been done. The further submission that since the respondents are being held liable to duty as a result of denial of the benefit of exemption under Notification 64/95, the benefit of modvat credit should be extended to them, also requires to be accepted in the light of the settled legal position on this aspect. Needless to say, the availability of the modvat credit is subject to verification of duty paying documents.

5. In the result, while holding that the benefit of exemption in terms of Notification 64/95 is not available to the goods in question, we remand the case for redetermination of duty liability in the light of our observations on the price being a cum duty price and also for examining and verifying the claim of the respondents to modvat credit benefit on verification of the relevant duty paying documents to be produced by the respondents. However, we do not accede to the prayer of the Revenue for restoration of the penalty imposed under order-in-original dated 29.5.2000 (there is no penalty imposed in the other adjudication order dated 24.10.1999), as we hold that this is not a fit case for penalising the respondents.

6. The appeals are thus partly allowed as above.