Pre-amendment set-off under Excise notification allowed for manufacturing inputs, while disputed items required fresh factual examination.

For the period before amendment of Notification No. 201/79-C.E., set-off was available for Item 68 goods used in manufacture without the later requirement that they be raw materials or component parts. On that basis, duty set-off for phosphoric acid, nickel catalyst and activated carbon used in vegetable products was admissible, and the demand based on those items could not stand. By contrast, the demand relating to tin tops and unprinted paperpolly could not be finally resolved because their actual use in manufacture had not been examined. That portion was therefore set aside and remanded for de novo consideration.

---

---

Issues: (i) Whether set-off of duty under Notification No. 201/79-C.E. prior to its amendment on 28-2-1982 was admissible in respect of Phosphoric Acid, Nickel Catalyst and Activated Carbon used in the manufacture of vegetable products. (ii) Whether the demand relating to Tin Tops and Unprinted paperpolly could be sustained without re-examination of their use, and the related demand required remand.

Issue (i): Whether set-off of duty under Notification No. 201/79-C.E. prior to its amendment on 28-2-1982 was admissible in respect of Phosphoric Acid, Nickel Catalyst and Activated Carbon used in the manufacture of vegetable products.

Analysis: The unamended notification allowed exemption where goods falling under Item 68 of the First Schedule to the Central Excises & Salt Act, 1944 had been used in the manufacture of excisable goods, without restricting such goods to raw materials or component parts. The later amendment by Notification No. 105/82-C.E. introduced a narrower condition, but that restriction did not govern the earlier period involved in the appeals. On that basis, the wider pre-amendment scope applied to the disputed materials.

Conclusion: The set-off was admissible for Phosphoric Acid, Nickel Catalyst and Activated Carbon, and the demand raised on that basis was not sustainable, in favour of the assessee.

Issue (ii): Whether the demand relating to Tin Tops and Unprinted paperpolly could be sustained without re-examination of their use, and the related demand required remand.

Analysis: The lower authorities had not discussed how Tin Tops and Unprinted paperpolly were used in the manufacture. In the absence of such findings, admissibility of set-off for these items could not be finally determined on the existing record and required fresh examination in light of the earlier Tribunal decisions and the observations on the scope of the unamended notification.

Conclusion: The portion of the demand relating to Tin Tops and Unprinted paperpolly was set aside and remanded for de novo consideration.

Final Conclusion: The assessee succeeded on the pre-amendment applicability of the set-off notification for the specified inputs, while the remaining dispute regarding the other materials was sent back for fresh adjudication.

Ratio Decidendi: For the period prior to the amendment of Notification No. 201/79-C.E., set-off was available for Item 68 goods used in manufacture without the later requirement that they be raw materials or component parts, and unresolved factual questions as to use required remand.

---