Excise exemption at time of manufacture governs duty liability, so later withdrawal at clearance does not create tax liability.

Goods manufactured during a period of full excise exemption under Rule 8(1) of the Central Excise Rules, 1944 were held not to attract duty merely because they were cleared after the exemption had been withdrawn. The applicable exemption position at the time of manufacture governed the tax consequence, and the later withdrawal of exemption at the clearance stage did not create duty liability on identical facts. On that basis, the demand could not be sustained and the refund claim was admissible.

---

---

Issues: Whether excise duty was payable on goods manufactured when they were fully exempt, but cleared during a period when the exemption stood withdrawn, and whether refund of duty paid on such clearances was admissible.

Analysis: The goods were manufactured while they were fully exempt from duty under a notification issued under Rule 8(1) of the Central Excise Rules, 1944. Although the exemption was later withdrawn and duty was sought to be levied on clearance, the governing principle applied was that the duty consequence must follow the exemption position applicable when the goods were manufactured. Following the earlier Tribunal view on identical facts, the absence of exemption at the time of clearance did not create duty liability where manufacture had occurred during the exempt period.

Conclusion: No duty was payable on the impugned goods, and the refund claim was admissible.

Final Conclusion: The demand could not be sustained and the refund claim was allowed.

Ratio Decidendi: Where goods are manufactured during a period of full exemption granted under Rule 8(1) of the Central Excise Rules, 1944, duty cannot be levied merely because they are cleared after the exemption is withdrawn.

---