Duty already paid condition for steel scrap exemption was read broadly to cover nil-rate clearance in the manufacturing chain.

Waste and scrap of steel arising in the manufacture of hand tools was treated as eligible for exemption under Notification No. 171/88-C.E. where the underlying bars and flats had suffered duty and no credit had been taken under Rule 56A or Rule 57A. The expression "duty already paid" was read to include duty contracted to be paid, and nil-rate clearance under Notification No. 214/86-C.E. was treated as satisfying the exemption condition in the context of the manufacturing chain. On that basis, the scrap cleared for conversion by job workers attracted no duty.

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Issues: Whether waste and scrap of steel arising in the manufacture of hand tools and cleared for conversion into bars/flats by job workers was exempt under Notification No. 171/88-C.E. dated 13-5-1988, and whether goods received under Notification No. 214/86-C.E. on nil duty could be treated as duty paid for the purpose of the exemption.

Analysis: The exemption under Notification No. 171/88-C.E. applied where duty had already been paid on the bars and flats and no credit of such duty had been taken under Rule 56A or Rule 57A of the Central Excise Rules, 1944. The Tribunal held that the expression "duty already paid" could include duty contracted to be paid, and that nil rate duty, in the context of the manufacturing chain and the exemption scheme, satisfied the statutory condition. Reliance was placed on the accepted administrative interpretation and the continuous nature of the process, in which the scrap arose from bars and flats purchased on duty payment and used without credit being taken.

Conclusion: The waste and scrap was held eligible for exemption, and no duty was payable on its clearance for conversion by job workers.

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