Duty-paid input exemption extended to nil-duty HR/CR strips; exemption on steel tubes allowed and demand rejected.

Steel tubes made from HR/CR strips cleared under Chapter X at nil duty were held to satisfy the exemption condition requiring manufacture from inputs on which duty had already been paid. The Tribunal construed "already paid" broadly to include duty legally leviable, contracted to be paid, or otherwise payable, not only duty actually discharged in cash. Following the Patna High Court and its own earlier order, it treated nil-duty inputs as duty-paid for the subsequent exemption. The exemption was therefore available, and the demand and penalty could not survive.

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Issues: Whether steel tubes manufactured from HR/CR strips received under Chapter X procedure on nil duty could be treated as goods made from inputs on which duty had already been paid for the purpose of availing exemption under the relevant notification.

Analysis: The exemption under the notification required that the tubes be manufactured from hot rolled or cold rolled products on which excise duty or additional duty had already been paid. The Tribunal applied the earlier interpretation that the expression "already paid" is not confined to cases where cash duty was actually discharged, but includes duty that was legally leviable, contracted to be paid, or ought to have been paid. On that reasoning, inputs cleared at nil duty under an exemption notification were treated as duty-paid for the purpose of the subsequent exemption on the final product. The Tribunal followed the Patna High Court decision and its own earlier order supporting that construction.

Conclusion: The appellants were entitled to the benefit of the exemption notwithstanding receipt of the inputs at nil duty, and the demand and penalty could not stand.

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