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Issues: Whether proforma credit of duty paid on inputs used in the manufacture of polyester fibre could be denied on the ground that part of the input emerged in methanol, a non-excisable by-product, and whether Notification No. 201/79 stood on the same footing as Rule 56A of the Central Excise Rules, 1944.
Analysis: The provisions of Rule 56A and Notification No. 201/79 were treated as materially identical in their relevant operation. The later amendment to the notification and the departmental circular clarified that credit on inputs was not to be reduced merely because part of the input was found in waste, refuse or by-product arising in the manufacturing process. The Court further held that methanol arose as an inevitable incident of the chemical reaction used to manufacture polyester fibre and was not a separate product for which the input credit could be denied. The trade notice and the Board's clarification were treated as relevant aids to the proper interpretation of the exemption scheme.
Conclusion: The set-off of duty on ethylene glycol could not be denied merely because a part of it appeared in methanol or other residual matter arising in the course of manufacture, and the assessee was entitled to the credit claimed.
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