Fly ash exemption for asbestos cement pipes must be tested on dry finished goods at clearance, excluding water content.

Exemption under Notification No. 38/93-C.E. for asbestos cement pipes and couplings turned on whether fly ash content was to be calculated with water content included. The relevant measure was the dry finished goods at the time of clearance from the factory, because goods under curing or containing water were not the cleared product. Water absorbed during manufacture could not be treated as part of the finished goods for testing the 25% fly ash threshold. On that basis, the statutory records showed compliance with the requirement, and the demand and penalty were unsustainable.

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Issues: Whether, for claiming exemption under Notification No. 38/93-C.E., the percentage of fly ash used in asbestos cement pipes and couplings had to be determined by including the water content or water gain in the finished product, and whether the demand and penalty could be sustained on that basis.

Analysis: The exemption applied to goods under Chapter 68 in which not less than 25% by weight of fly ash had been used. The relevant point for determining compliance was the stage of clearance from the factory, when the pipes were in dry condition and in a marketable form. Pipes under curing or containing water were not the cleared goods. The weight of wet pipes or water absorbed during manufacture could not be treated as part of the finished product for calculating the fly ash percentage. The Board's circular and the earlier tribunal view supported calculation on the basis of the dry finished goods at the time of clearance. On the facts, the material available from the statutory records showed that the fly ash content met the 25% requirement.

Conclusion: The inclusion of water content was impermissible, the exemption could not be denied on that basis, and the demand and penalty were unsustainable.

Ratio Decidendi: For exemption linked to a minimum percentage of a raw material by weight, the percentage must be computed with reference to the dry finished goods at the time of clearance, excluding water content or water gain acquired during manufacture.

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