Per Shri V.P. Gulati :

The issue in the appeal relates to benefit of Notification 431/86 under which the goods manufactured in ship yard intended for use in the manufacture or repair of the goods falling under certain headings are exempt. The appellants' item is Caisson Gate which is classifiable under heading 89.07 which figures under the Notification. The plea of the appellants is that caisson gate is used in the manufacture of the goods in the ship yard. The purpose and use of caisson gate as set out in the order of the original authority in para 2 is reproduced below for convenience of reference :

2. In the instant case, Caisson Gate was a 300 tonne steel structure, fabricated to suit to the size of graving dock for purpose of isolating the dock from the sea. For the purpose of repair, the ship has to enter the dry dock premises. To facilitate the movement of the vessel the caisson gate is to be shifted away from its original position. During the course of manufacture or repair, the gate is completely closed in which case it acts as a water tight door for the dock. This prevents any sea water from flooding the dry dock. After the repair work is over, the gate is again lifted so that the vessel can sail out of the dry dock into the sea. It is thus, in the nature of a gate which only function is to protect the dry dock area from the submergence of sea water.

The question therefore to be determined in the appeal is whether the item in question, the manner in which it is used can be taken to be of the nature covered under the aforesaid Notification.

2. Shri Sarveswara Row, learned Counsel for the appellants does not contest the factual position as to the manner in which caisson gate is used. The plea however is that since the caisson gate as such is manufactured and is installed there in and its use is essential for carrying out the operations in the ship yard, the benefit as claimed in terms of the Notification should be allowed. The learned Counsel in this connection referred us to the judgement of the Hon'ble Supreme Court in the case of Rajasthan State Chemical Works Vs. CCE reported in 1991 (55) ELT 444 (SC) to urge that the term used as set out in the Notification should be taken to be a term of wider import. He has pleaded the Hon'ble Supreme Court in the case of Rajasthan State Chemical Works has in the context of Notification 179/77 CE dated 18.6.77 held that if any operation during the course of manufacture of a finished product is so integrally connected with further operations which result in the emergence of manufactured goods, such operation should be taken to be in relation to the manufacture of the finished product. He in this connection drew our attention to the Notification 431/86 which is reproduced below for convenience of reference :

Exemption to goods produced in a ship yard and used in manufacture of goods falling under heading Nos. 89.01, 89.02, 89.04, 89.05 (excluding floating or submersible drilling or production platforms) and 89.06. In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts all excisable, goods manufactured in a shipyard and intended for use in the manufacture or repair of goods falling under heading Nos. 89.01, 89.02, 89.04, 89.05 (excluding floating or submersible drilling or production platforms) and 89.06 in the same shipyard in which such goods are manufactured or any other shipyard of the manufacturer of such goods, from the whole of the duty of excise leviable thereon which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986):

Provided that where such use is in a shipyard of the manufacturer of such goods, different from his shipyard where the said goods have been manufactured, the exemption contained in this notification shall be allowed only if the procedure set out in Chapter X of the Central Excise Rules, 1944, is followed.

(Notification No. 431/86 C.E. dated 6.10.1986 as