Rule 56A(7) cannot be used to move unprocessed inputs for a marketable intermediate product and obtain an indirect concession.

Rule 56A(7) of the Central Excise Rules, 1944 was held to be an enabling provision limited to removal of partially processed goods for tests, repairs, refining, reconditioning or similar operations necessary for manufacture. Permission was not ordinarily available where the second factory would produce a marketable product, and the rule could not be used indirectly to obtain a concession unavailable directly under the rule or Notification No. 201/79. On the facts, the inputs were not shown to be partially processed before removal to the other factory, so permission to send duty-paid inputs for manufacture of alkyd resin and receive the resin back for paints and varnishes was refused.

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Issues: Whether permission under Rule 56A(7) of the Central Excise Rules, 1944 could be granted to send duty-paid inputs from the respondent's factory to another factory for manufacture of alkyd resin, an intermediate product, and to receive the resin back for manufacture of paints and varnishes.

Analysis: Rule 56A(7) is an enabling provision for removal of partially processed goods outside the factory for tests, repairs, refining, reconditioning, or other operations necessary for manufacture. The scope of "other operations" has to be read in light of the processes specifically mentioned in the rule. The Tribunal held that where the second factory produces a marketable product, permission under the rule is not ordinarily available. It further held that what is not admissible directly under the rule or under Notification No. 201/79 cannot be permitted indirectly by sending inputs to another factory for production of an intermediate product. The Tribunal also noted that the inputs had not been shown to be partially processed before removal to the second factory.

Conclusion: The refusal of permission was and the respondent was not entitled to permission under Rule 56A(7).

Ratio Decidendi: Rule 56A(7) does not permit removal of unprocessed inputs to another factory for manufacture of a marketable intermediate product when such a course would indirectly secure a concession that is not available directly and the goods are not shown to be partially processed.

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