Intermediate goods in imitation jewellery manufacture qualify for exemption where they arise in the manufacturing chain and are used in production.

Gold potassium cyanide used in the manufacture of imitation jewellery was treated as an intermediate product arising during the course of that manufacturing process. On the facts recorded, the goods were produced in the factory as part of the manufacturing chain and were used in making the final product, so the Tribunal held that the exemption notification applied to them. The demand was therefore not sustainable, and the order dropping the demand was upheld.

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Issues: Whether gold potassium cyanide manufactured in the course of making imitation jewellery was an intermediate product arising during the course of manufacture of imitation jewellery and was entitled to the benefit of Notification No. 84/2003-C.E. (N.T.).

Analysis: The process shown on record established that gold potassium cyanide was produced in the factory as part of the manufacturing chain leading to imitation jewellery. The final product was imitation jewellery, and the intermediate goods were generated and used in that manufacture. On that basis, the Tribunal found no infirmity in the view that the goods emerged during the course of manufacture of imitation jewellery and fell within the scope of the exemption notification issued under Section 11C.

Conclusion: The notification benefit was available to gold potassium cyanide, and the demand was not sustainable.

Final Conclusion: The Revenue's challenge failed and the order dropping the demand was upheld.

Ratio Decidendi: Intermediate goods generated as part of the manufacturing process of imitation jewellery are covered by the exemption granted for goods arising during the course of such manufacture under the applicable notification.

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