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Issues: Whether exemption under Notification No. 4/97 was available to plastic pouches where Modvat credit had been taken on granules used to manufacture film, while no credit had been taken on the film used as the input for the pouches.
Analysis: The exemption condition only required that no credit of duty paid on the inputs used in the manufacture of the notified goods should have been availed of. The goods at the intermediate stage were treated as a distinct manufactured product on payment of duty, and the relevant input for the final product was the film, not the granules. Since no Modvat credit was taken on the duty paid on the film, the fact that credit had earlier been taken on granules used for the manufacture of film did not defeat the exemption. The identity of the actual manufacturer was held to be irrelevant to the condition in the notification.
Conclusion: The exemption was rightly availed by the assessee, and the duty demand and penalty were unsustainable.
Ratio Decidendi: Where a notification denies exemption only if credit of duty paid on the inputs used in the manufacture of the final goods has been availed, credit taken on an earlier, distinct manufacturing stage does not disqualify the assessee if no credit was taken on the immediate input used for the notified goods.
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