Duty-paid raw material exemption and limitation on unapproved classification list both failed in excise dispute.

An excise exemption conditioned on use of duty-paid raw material was denied because copper scrap bought from the open market could not be presumed to have suffered duty; the assessee had to show actual duty payment or another acceptable basis, and that requirement was not met. The limitation plea also failed because the classification list was still unapproved when the show cause notice issued, so limitation ran from finalization of classification rather than from the filing date. The Supreme Court therefore upheld rejection of both the exemption claim and the challenge to limitation.

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Issues: (i) Whether the appellant was entitled to exemption under the relevant excise notifications on the footing that the copper scrap used as raw material should be treated as duty paid; and (ii) whether the demand was barred by limitation in view of the classification list and the stage of approval.

Issue (i): Whether the appellant was entitled to exemption under the relevant excise notifications on the footing that the copper scrap used as raw material should be treated as duty paid.

Analysis: The exemption depended on the raw material used in the manufacture of the final product being duty paid, or otherwise established by acceptable proof or a deeming basis. The appellant's case that scrap purchased from the open market should automatically be treated as duty paid was not accepted, since waste and scrap are not invariably excisable goods and it could not be assumed that all such material had suffered excise duty earlier. The object of the exemption was to avoid cascading, but that did not dispense with the condition that duty payment on the input must be shown.

Conclusion: The appellant was not entitled to the benefit of the exemption notifications on this basis.

Issue (ii): Whether the demand was barred by limitation in view of the classification list and the stage of approval.

Analysis: The classification list filed by the appellant had not been approved when the show cause notice was issued, and approval came only later. In the absence of approval of the classification list and final assessment, limitation was held to run only from the finalization of classification. The authorities relied on by the appellant were held inapplicable on the facts.

Conclusion: The plea of limitation failed.

Final Conclusion: The exemption claim and the limitation challenge both failed, and the dismissal of the appeal followed.

Ratio Decidendi: An exemption conditioned on use of duty-paid raw material cannot be availed on a mere presumption that open-market scrap is duty paid, and where a classification list remains unapproved, limitation is computed from finalization of classification rather than from the earlier filing date.

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