Nil-duty inputs may still satisfy prior-duty conditions under an exemption notification, preserving eligibility for the finished goods exemption.

Inputs cleared at nil duty under an exemption notification were treated as satisfying the condition that the specified inputs had already borne the appropriate excise duty for claiming Notification No. 101/66-C.E. The term "paid" was construed in the statutory context to include duty that was legally exigible or contractually payable, not only cash duty actually remitted. On that reading, nil assessment of the inputs did not by itself defeat the downstream exemption where the substantive conditions of the notification were met, and the finished goods remained eligible for the benefit.

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Issues: Whether inputs cleared at nil duty under the exemption notification could be treated as having suffered the appropriate duty for claiming the benefit of Notification No. 101/66-C.E. for the finished goods.

Analysis: The exemption under the notification was available only if the specified inputs had already borne the appropriate duty of excise. The expression "paid" in the context of such a notification was construed in the light of the statutory scheme and the relevant precedent to mean duty that ought to have been paid or was contracted to be paid, and not necessarily duty actually paid in cash. Where the very input was exempt and therefore attracted nil duty, that nil assessment did not by itself defeat eligibility for the subsequent exemption, if the notification's condition was otherwise satisfied in substance.

Conclusion: The exempted inputs cleared at nil duty were to be treated as duty-paid for the purpose of the notification, and the assessee was entitled to the exemption.

Final Conclusion: The appeal succeeded and the demand was set aside on the ground that nil-duty inputs did not disqualify the finished goods from the notified exemption.

Ratio Decidendi: In the context of an exemption notification, the words "appropriate duty ... has already been paid" may include duty that was legally exigible but assessed at nil, so that nil-duty clearance can satisfy the condition of prior payment where the statutory context so requires.

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