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Issues: (i) whether the goods in question were liable to central excise duty; (ii) whether the assessee was entitled to the benefit of the small scale exemption and outside licensing control.
Issue (i): whether the goods in question were liable to central excise duty.
Analysis: The impugned demand had been set aside by the High Court, which quashed the show cause notice and held that the goods were not subject to central excise duty. In view of that binding determination, the question of sustaining duty liability before the Tribunal did not survive.
Conclusion: The goods were held not liable to central excise duty, in favour of the assessee.
Issue (ii): whether the assessee was entitled to the benefit of the small scale exemption and outside licensing control.
Analysis: The High Court had also held that the assessee was entitled to the benefit of Notification No. 175/86 and was not covered by licensing control under Rule 174A of the Central Excise Rules, 1944. Those findings governed the connected questions raised in the appeal.
Conclusion: The assessee was held entitled to the exemption benefit and not subject to licensing control, in favour of the assessee.
Final Conclusion: The appeal succeeded because the underlying proceedings had already been quashed and the assessee's challenge to duty liability and related exemption issues stood accepted.
Ratio Decidendi: Where the underlying show cause notice has been quashed and the goods have been held not exigible to duty, the connected questions of exemption and licensing control are also answered in favour of the assessee.
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