Exemption for own-manufacture and duty on job-work Acid Slurry required recomputation after adjusting collected amounts, with no penalty.

Acid Slurry manufactured in the assessee's own unit qualified for exemption under Notification No. 88/88-C.E. because the unit fell within the notified class and the Revenue did not dispute eligibility. Acid Slurry manufactured through a job worker under Notification No. 214/86-C.E. remained duty liable when used in exempt detergent powder, but the amount equal to 8% of the clearance price of the detergent powder had to be adjusted while recomputing the demand. No penalty was warranted on the facts, and the matter required fresh computation by the original authority.

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Issues: (i) whether Acid Slurry manufactured in the assessee's own unit was eligible for exemption under Notification No. 88/88-C.E. dated 1-3-88; (ii) whether Acid Slurry manufactured through a job worker under Notification No. 214/86-C.E. was liable to duty when used in the manufacture of exempted Detergent Powder, and whether the amount equal to 8% of the price collected at clearance of Detergent Powder was liable to be adjusted against such demand; and (iii) whether penalty was warranted.

Issue (i): whether Acid Slurry manufactured in the assessee's own unit was eligible for exemption under Notification No. 88/88-C.E. dated 1-3-88

Analysis: The exemption applied to the specified goods manufactured in rural areas by the categories of units described in the notification. The assessee fell within the notified class, and the Revenue did not dispute eligibility under the notification for the Acid Slurry manufactured in the assessee's own unit.

Conclusion: The Acid Slurry manufactured in the assessee's own unit was exempt and no duty was payable; the Revenue's appeal on this aspect was rejected.

Issue (ii): whether Acid Slurry manufactured through a job worker under Notification No. 214/86-C.E. was liable to duty when used in the manufacture of exempted Detergent Powder, and whether the amount equal to 8% of the price collected at clearance of Detergent Powder was liable to be adjusted against such demand

Analysis: Acid Slurry obtained from the job worker and used in the manufacture of exempted Detergent Powder attracted duty liability under the job work exemption arrangement. At the same time, the amount collected at 8% of the price of Detergent Powder at the time of clearance was directed to be taken into account while working out the duty demand on Acid Slurry.

Conclusion: Duty was payable on the Acid Slurry manufactured by the job worker, but the 8% amount was required to be adjusted against the demand, and the matter had to be recomputed by the original authority.

Issue (iii): whether penalty was warranted

Analysis: On the facts and manner of computation directed, the case was not considered fit for penalty.

Conclusion: No penalty was imposable.

Final Conclusion: The exemption claim succeeded for Acid Slurry manufactured in the assessee's own unit, duty liability was upheld for job-worker-manufactured Acid Slurry subject to adjustment of the collected amount, and the matter was sent back for fresh computation without penalty.

Ratio Decidendi: Eligibility under a specified exemption notification must be tested on the terms of the notification, while duty arising from job-work manufacture used for exempt clearances must be worked out after giving due credit for amounts already collected and adjusted.

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