Exemption for rolled steel products depended on duty-paid ingots being cut or broken before rolling, not on where that happened.

Exemption under Notification No. 206/63, as amended, was interpreted to extend to mild steel rounds and rods made from duty-paid mild steel ingots where the ingots were cut or broken before rolling. The decisive condition was that the ingots were not rolled in their original form; the place at which cutting or breaking occurred was immaterial if that condition was satisfied. On that construction, iron and steel products falling within Item 26AA(ia) could qualify for the exemption when duty-paid ingots were treated as scrap and re-rolled into the specified products, and the demand and penalty were held unsustainable.

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Issues: Whether mild steel rounds and rods manufactured from duty-paid mild steel ingots were exempt from excise duty under Notification No. 206/63 as amended by Notification No. 123/65 when the ingots were cut or broken before being rolled.

Analysis: The exemption applied to iron and steel products falling under sub-item (ia) of Item 26AA of the First Schedule to the Central Excises and Salt Act, 1944, provided they were manufactured from duty-paid ingots that were cut or broken but not rolled. The relevant condition was satisfied if the ingots were cut or broken in the factory before rolling, and the notification did not require that the ingots must have been cut or broken at the point of supply. The products manufactured by the petitioners fell within Item 26AA(ia), the ingots were duty paid, and the record showed that they were treated as scrap and then re-rolled. On this construction, the exemption could not be denied merely because the ingots were not initially supplied in a cut or broken condition.

Conclusion: The petitioners were entitled to the exemption, and the demand and penalty were unsustainable.

Ratio Decidendi: For the exemption under the notification to apply, duty-paid ingots need only be cut or broken and not rolled before being converted into the specified rolled products; the place where cutting or breaking occurs is immaterial if that condition is met.

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