Duty-paid railway scrap used for M.S. round bars can still qualify for exemption under the notification.

Notification No. 202/88-C.E. exempted M.S. round bars manufactured from rollable or re-rollable material recognisable as duty paid. Railway auction material such as used rails, wheels and fish plates was treated as duty paid under the settled legal position, and that presumption applied to inputs purchased from railway auctions. On that basis, the exemption could not be denied merely because the raw material consisted of old and discarded railway scrap. The manufactured M.S. round bars therefore qualified for the notification, and the exemption was available.

---

---

Issues: Whether the benefit of Notification No. 202/88-C.E. was available to M.S. round bars manufactured from old and discarded railway material purchased in auction.

Analysis: The goods were manufactured from old and used railway material such as rails, wheels and fish plates purchased from Railway auction. The governing notification exempted M.S. round bars manufactured from rollable or re-rollable material recognisable as duty paid. The material auctioned by the Railways was treated as duty paid on the basis of the legal position settled by higher judicial authority, and the duty-paid nature of such auctioned material was required to be presumed under the notification. Following that settled interpretation, the exemption could not be denied merely because the inputs were old railway scrap.

Conclusion: The benefit of Notification No. 202/88-C.E. was available to the appellant, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded because the manufactured goods qualified for exemption under the notification on the footing that the railway auction material was to be treated as duty paid.

Ratio Decidendi: Where exempt goods are manufactured from railway auction material that is treated as duty paid under the notification, the exemption cannot be denied merely because the inputs are old and used scrap.

---