Factory-use exemption and no double excise levy on duty-paid repair parts used to repair old transformers.

Goods manufactured in a factory and consumed within that same factory for repairing old transformers fell within the Rule 8 exemption for goods intended for use in the factory, so no excise duty was payable on the self-manufactured parts. Parts purchased from the market on which excise duty had already been paid could not be subjected to duty again merely because they were later used for the same repairing activity, so no second levy was permissible. The levy on the transformer repair parts was therefore set aside to the extent indicated.

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Issues: (i) whether parts manufactured by the assessee in its factory and used in the same factory for repairing old transformers were entitled to exemption under the notification issued under Rule 8 of the Central Excise Rules; (ii) whether excise duty could be levied again on parts purchased from the market on which duty had already been paid.

Issue (i): whether parts manufactured by the assessee in its factory and used in the same factory for repairing old transformers were entitled to exemption under the notification issued under Rule 8 of the Central Excise Rules.

Analysis: The notification exempted goods falling under Item 68 of the First Schedule to the Central Excises and Salt Act, 1944, when manufactured in a factory and intended for use in that factory. The parts made by the assessee and consumed within its own factory for repairing old transformers satisfied that description. The Tribunal had failed to consider the effect of the notification, and the clarification order did not validly address the exemption.

Conclusion: The assessee was entitled to the exemption on such self-manufactured parts, and no excise duty was payable on their value.

Issue (ii): whether excise duty could be levied again on parts purchased from the market on which duty had already been paid.

Analysis: Parts bought from others and already subjected to excise duty could not be charged to duty a second time merely because they were used in repairing old transformers. There was no basis for repeated levy on the same goods.

Conclusion: No excise duty was payable again on the purchased duty-paid parts.

Final Conclusion: The assessee succeeded; the levy of excise duty on the parts used in repairing old transformers was set aside to the extent indicated by the Court.

Ratio Decidendi: Goods manufactured in a factory and consumed in that same factory for the stated exempt purpose fall within the exemption notification, and duty already paid on goods cannot be levied again on their subsequent intra-factory use.

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