Exemption classification turns on the whole manufacturing process, and later compressed air use did not exclude glass jars from S. No. 1.

Glass jars made by taking molten glass to the first mould manually and then using compressed air later in manufacture were held to fall within S. No. 1 of Notification No. 329/77, because the relevant entry had to be read as applying to the manufacturing process as a whole. The later use of compressed air did not exclude the goods from that entry. S. No. 3 was inapplicable, as it covered goods fully manufactured by a merely manual process at the first mould stage. Exemption notifications were construed strictly, and the classification under S. No. 1 was upheld against the assessee.

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Issues: Whether glass jars manufactured by a process in which molten glass is taken to the first mould manually and compressed air is used at a later stage fall under S. No. 1 of the table annexed to Notification No. 329/77 dated 26-11-77, or under S. No. 3.

Analysis: The relevant entry in S. No. 1 was read as referring to the factory process as a whole and not to any isolated stage of manufacture. Since the goods were produced by a process in which molten glass was taken to the first mould manually and compressed air was used in manufacture, the later use of compressed air did not take the goods out of S. No. 1. S. No. 3 was held inapplicable because that entry contemplated goods fully manufactured by a merely manually operated process at the first mould stage. Exemption notifications were held to require strict construction.

Conclusion: The goods were correctly classified under S. No. 1 of Notification No. 329/77 and not under S. No. 3, against the assessee.

Final Conclusion: The revision failed and the appellate order classifying the goods under the exemption notification was left undisturbed.

Ratio Decidendi: For exemption classification, the manufacturing process must be viewed as a whole, and an exemption entry must be construed strictly according to its terms.

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