Customs duty on manufacturing wastage cannot be levied absent express notification language authorising such a charge.

An exemption notification granting concessional customs duty on imported stainless steel strips used for specified manufacture did not permit duty on bona fide manufacturing wastage. The record showed the material was consumed for the intended manufacture, and the gap between input and finished output represented process wastage rather than diversion or unauthorised use. Because the notification contained no express levy provision for such wastage, and no portion of the raw material was shown to have been withheld from the permitted manufacture, differential customs duty could not be imposed on the wastage. The demand was therefore held unsustainable and set aside in favour of the assessee.

---

---

Issues: Whether customs duty could be levied on quantities lost as manufacturing wastage when the imported stainless steel strips were shown to have been used for the intended manufacture under Notification No. 152/77.

Analysis: The exemption notification granted concessional customs duty for imported stainless steel strips used for specified manufacture and required payment only in respect of such quantity as was not proved to the satisfaction of the Customs authority to have been used for that manufacture. The record showed that the imported material had been consumed for the intended manufacture and that the difference between input and finished output represented wastage in the manufacturing process. The notification contained no express provision authorising duty to be charged on such wastage, and there was no material to show that any portion of the raw material had been diverted or withheld for an unauthorised purpose. In the absence of a specific levy provision in the notification, duty could not be imposed on manufacturing wastage.

Conclusion: The demand for differential customs duty on manufacturing wastage was unsustainable and was set aside in favour of the assessee.

Ratio Decidendi: Where an exemption notification authorises differential duty only on goods not proved to have been used for the intended manufacture, customs duty cannot be levied on bona fide manufacturing wastage unless the notification expressly so provides.

---