Duty-paid inputs consumed in manufacture can still qualify for set-off when used in relation to the finished product.

Polyethylene glycol used as a softener or plasticiser in the manufacture of cellulose film was treated as a qualifying duty-paid input/raw material for set-off under Notification No. 201/79-C.E. The principle applied was that an input may still qualify even if it is consumed in the manufacturing process or does not retain a separate identity in the finished product. The analysis also relied on earlier rulings recognising set-off for inputs used in or in relation to manufacture, including intermediate or consumptive use. On that basis, the benefit under the notification was available.

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Issues: Whether polyethylene glycol used in the manufacture of cellulose film was a qualifying input/raw material so as to entitle the assessee to exemption or set-off under Notification No. 201/79-C.E.

Analysis: The notification was applied in the light of the principle that duty-paid inputs used in the manufacture of the finished product qualify for set-off even if the input is consumed in the process or does not retain its separate identity in the end-product. The material showed that polyethylene glycol was used as a softener/plasticiser in the manufacture of cellulose film and was part of the manufacturing process of the finished product. The decision also drew support from prior rulings recognising set-off for inputs used in or in relation to manufacture, including where the input operates at an intermediate stage or is consumed during the process.

Conclusion: The polyethylene glycol was a qualifying input/raw material and the assessee was entitled to the benefit under Notification No. 201/79-C.E.

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