Exemption for deemed supplies under excise notifications sustained; intermediate products not dutiable merely due to February clearances.

Exemption under Notification No. 11/97-C.E. read with Notification No. 108/95-C.E. was treated as applicable to clearances made in February 1997, because Rule 57C did not deny credit or duty relief where the final product supply fell within the intended exemption scheme. The amendment was viewed as curing an anomaly rather than creating a new restriction, and the intermediate products used in manufacture were therefore not dutiable merely because the clearances occurred in the disputed month. On that construction, the duty demand on the intermediate goods was unsustainable.

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Issues: Whether the benefit of Notification No. 11/97-C.E. dated 01.03.1997, read with Notification No. 108/95-C.E. dated 28.08.1995, was available for clearances made in February 1997 so as to deny duty demand on the intermediate products and whether the impugned demand could be sustained.

Analysis: Rule 57C of the Central Excise Rules, 1944 disallowed credit where the final product was exempt, but it carved out supplies covered by Notification No. 108/95-C.E. dated 28.08.1995. The amendment introduced by Notification No. 11/97-C.E. dated 01.03.1997 was treated as removing an anomaly in the exemption scheme. The supply of the final product to the concerned organisation brought the case within the intended scope of the exemption, and the intermediate parts used in manufacture were not liable to duty merely because the supplies fell in the disputed month. The earlier view taken in similar matters supported this construction.

Conclusion: The exemption benefit was held available and the duty demand was not sustainable; the appeal succeeded.

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