1986 (12) TMI 209 - AT - Central Excise

Interpretation of Exemption Notifications for Varnishes in Paint Manufacturing

The case involved interpreting exemption notifications 20/72 and 80/80 for varnishes used in manufacturing paints. The dispute centered on whether ... Captive consumption Issues:1. Interpretation of exemption notification 20/72 for varnishes.2. Applicability of exemption notification 80/80 for varnishes used in the manufacture of paints.3. Calculation of duty on varnishes captively consumed for manufacturing paints.4. Exclusion of captively consumed varnishes from duty payment under notification 80/80.Analysis:1. The appeal challenged the Collector of Central Excise's order alleging wrongful availing of exemption under notification 20/72 for varnishes used in manufacturing paints. The Collector held duty payment necessary for varnishes used in paints cleared without duty payment, rejecting the appellants' claim for exemption.2. The appellants argued that varnishes used in manufacturing paints were exempt under notification 80/80, not 20/72. They cited notification 123/80, explaining that varnishes used as inputs for finished goods (paints) under the same tariff item were not considered for clearance value calculation under 80/80.3. The Tribunal deliberated whether varnishes captively consumed for paints' manufacture should be exempt under notification 80/80. It was noted that while the notification excluded captively consumed varnishes from clearance value calculation, it did not explicitly exempt them from duty payment.4. In a split decision, one member upheld the appellants' argument, stating that varnishes captively consumed for paints should be exempt from duty payment under notification 80/80. The majority decision allowed the appeal, setting aside the duty demand against the appellants based on this interpretation. However, the minority view emphasized that excluding varnishes from clearance value calculation did not equate to a full exemption from duty payment for captively consumed goods.