Exemption for power-free manufacture remains available when powered production is confined to an excisable intermediate raw material in another factory.

Exemption under Notification No. 227/77-C.E. was available where the final product was manufactured without the aid of power, even though power was used to make an excisable intermediate raw material in a separate factory. Acid slurry was cleared on payment of duty from the intermediate unit to the scouring powder unit, and the use of power at the raw-material stage was not treated as use of power in the manufacture of the final product. On the facts recorded, the Revenue did not displace the finding that scouring powder itself was manufactured without power, so denial of the exemption was unsustainable.

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Issues: Whether the benefit of the exemption under Notification No. 227/77-C.E. could be denied on the ground that power was used in the manufacture of the intermediate raw material, namely acid slurry, when the final product, scouring powder, was manufactured without the aid of power in a separate factory.

Analysis: The exemption applied to the final product if no process was ordinarily carried on with the aid of power in or in relation to its manufacture. Acid slurry was an excisable intermediate product and, on the facts, was manufactured in a different factory and cleared on payment of duty to the unit manufacturing scouring powder. The use of power in the manufacture of a raw material cannot be treated as use of power in the manufacture of the final product. Since the factual position showed that the final product itself was manufactured without power and the Revenue did not displace the finding that the intermediate product came from a separate factory, the exemption could not be denied.

Conclusion: The denial of exemption was unsustainable and the Revenue's appeal failed.

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