Exemption notification computation must use dry weight of finished goods, not process water as a raw material.

An exemption notification for Chapter 68 goods using fly ash or phospho-gypsum was construed to require computation by reference to the dry weight of the finished goods, not by treating process water as a raw material in the denominator. The phrase "minus the water-content" was read as excluding moisture present in the finished product, and the later deletion of that phrase was taken to remove practical difficulty in determining dry weight, not to change the treatment of water used in manufacture. On that basis, the revenue's method of aggregating raw materials and process water was rejected, and the assessee was held entitled to the exemption.

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Issues: Whether, for claiming exemption under the notification, the percentage of fly ash was to be computed by treating water as a raw material and by ignoring the water recovered during manufacture, or whether the notification required computation with reference to the dry weight of the finished goods and excluded water content only from the finished product.

Analysis: The notification, as originally framed, granted exemption to goods falling under Chapter 68 in which more than 30% by weight minus the water content of fly ash or phospho-gypsum or both had been used. The expression "minus the water-content" was read as referring to the dry weight of the finished goods, because the exemption was attached to the goods themselves and not to the total raw materials used in manufacture. Water-content was treated as the moisture present in the finished product, not as a raw material for the purpose of the formula. The later deletion of the words "minus the water-content" was understood as removing the practical difficulty of determining dry weight and adopting the actual weight of the goods at clearance, not as introducing a requirement to count water as a raw material. On that construction, the Revenue's method of aggregating all raw materials and treating process water as part of the denominator could not be accepted.

Conclusion: The notification had to be construed with reference to the dry weight of the finished goods, and water used in the process was not to be treated as a raw material for determining the percentage of fly ash. The assessee was entitled to the exemption.

Final Conclusion: The adjudication order was set aside and the appeals succeeded on the exemption issue.

Ratio Decidendi: Where an exemption notification measures the percentage of a specified ingredient in finished goods and refers to exclusion of water content, the computation is to be made on the basis of the goods as cleared, not by treating process water as a raw material in the total mix.

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