Commercial identity of jute bags preserved despite polythene liner, so exemption remained available.

Polythene-lined jute bags were held to retain the commercial identity of "sacks and bags of jute" for exemption under Notification No. 65/87-C.E. The decisive test was whether the duty-paid polythene liner altered the essential character of the goods; it was treated as an internal addition that did not change the basic nature of the bags. As the goods continued to be known and marketed as jute bags, the Revenue's contention that they had to be made only of jute was rejected. The exemption was therefore applicable, and the classification and benefit granted to the assessee were upheld.

---

---

Issues: Whether polythene-lined jute bags continued to answer the description of "sacks and bags of jute" so as to qualify for exemption under Notification No. 65/87-C.E.

Analysis: The decisive consideration was whether insertion of a duty-paid polythene liner altered the basic nature of the jute bag. The Court held that the liner was only an internal addition and did not change the essential character of the goods. The bags remained known and marketed as jute bags, and the presence of the polythene liner did not make them any different in substance from sacks and bags of jute covered by the notification. The Revenue's view that the bags had to be made only of jute was rejected.

Conclusion: The exemption was applicable to the polythene-lined jute bags, and the Revenue's challenge failed.

Final Conclusion: The classification and exemption benefit granted to the assessee were upheld, and the appeal was dismissed.

Ratio Decidendi: An exemption for goods described by their commercial identity is not denied merely because a duty-paid ancillary material is inserted, if the addition does not alter the essential character of the goods.

---