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Issues: Whether the imported polyamide chips were entitled to exemption from countervailing duty under the central excise exemption notification when they were stated to be used in the manufacture of nylon yarn.
Analysis: Countervailing duty under section 2A of the Indian Tariff Act was linked to the excise duty leviable on a like article produced or manufactured in India. The exemption notification issued under rule 8 of the Central Excise Rules exempted polyamide chips from the whole of the excise duty if they were used in the manufacture of nylon yarn, subject to compliance with the prescribed procedure where the use was elsewhere than in the factory of production. The intended use of the imported chips for manufacture of nylon yarn was stated by the petitioner and was not disputed by the respondents, so the condition for exemption stood satisfied.
Conclusion: The imported polyamide chips were not liable to countervailing duty, and the petitioner was entitled to refund of the duty collected.
Final Conclusion: The challenge to the demand for countervailing duty succeeded because the exemption conditions were held to have been fulfilled.
Ratio Decidendi: Where an exemption notification grants relief on the condition that imported goods are to be used for a specified manufacture, and the intended use is undisputed, the exemption cannot be denied and countervailing duty is not leviable.
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