Double duty on inputs rejected where duty had already been demanded on the finished goods manufactured from those raw materials.

Duty could not be demanded again on raw materials used to manufacture finished goods where duty had already been demanded on those finished goods. The same factual basis supported both demands, and the principle applied was that, once the finished goods are treated as liable to duty, the duty burden attaches to the finished goods rather than being repeated on the inputs used in their manufacture. On those facts, the later demand on the raw materials was not sustainable and was set aside in favour of the assessee.

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Issues: Whether duty could be demanded again on raw materials used in the manufacture of finished goods when duty had already been demanded on those finished goods.

Analysis: The demand on raw materials arose from the same set of facts on which duty had earlier been demanded on the finished goods. The underlying principle applied was that where the finished goods are treated as diverted or otherwise liable to duty, the duty liability attaches to the finished goods and not again to the raw materials used for their manufacture. On the facts found, the later demand on inputs was not sustainable.

Conclusion: The demand of duty on the raw materials was not justified and was set aside in favour of the assessee.

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