Chapter X remission is distinct from exemption, so captive phosgene gas was not liable to duty demand.

Phosgene gas captively consumed in manufacturing was held not liable to duty demand where the final product was cleared under Chapter X procedure. The remission of duty available under that procedure was treated as distinct from a general exemption or a clearance at nil rate of duty. As the final product was not shown to be wholly exempted in the relevant sense, the appellate view that Chapter X remission cannot be equated with exemption was upheld, and the Revenue's demand failed.

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Issues: Whether phosgene gas captively consumed in the manufacture of the final product, which was cleared under Chapter X procedure, could be treated as exempted or as liable to nil rate of duty so as to attract the duty demand.

Analysis: The clearances of the final product were effected under Chapter X procedure and the duty concession operated as remission of duty on the inputs used within the factory. Such remission is distinct from a general exemption or a clearance at nil rate of duty. The final product was not shown to be wholly exempted in the sense required to sustain the demand, and the reasoning adopted by the appellate authority that remission under Chapter X cannot be equated with exemption from duty was upheld.

Conclusion: The demand on captively consumed phosgene gas was not sustainable. The Revenue's appeal failed and the decision was in favour of the assessee.

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