Incidental use of power does not defeat exemption for ferro alloys made by the alumino thermic process.

Ferro alloys manufactured by the alumino thermic process were treated as eligible for exemption as goods manufactured without the aid of power under Notification No. 209/83-C.E. The record indicated that such alloys could be produced without power and that the process used fell within the notification. Incidental use of power in allied activities, including operating a blower or hoist or preparing aluminium powder, did not change the character of the finished goods, because those activities did not directly form part of the manufacture of the exempt goods. The exemption therefore remained available, and the connected limitation issue was left undecided as unnecessary.

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Issues: (i) whether ferro alloys manufactured by the alumino thermic process were entitled to exemption under Notification No. 209/83-C.E. as goods manufactured without the aid of power; (ii) whether use of power in allied activities such as the blower, hoist or preparation of aluminium powder disentitled the goods from exemption.

Issue (i): whether ferro alloys manufactured by the alumino thermic process were entitled to exemption under Notification No. 209/83-C.E. as goods manufactured without the aid of power.

Analysis: The exemption notification granted nil rate of duty to ferro alloys manufactured without the aid of power and by employing the alumino thermic or thermit process. The material on record, including technical literature, showed that ferro alloys could be produced without power and that the appellant followed the alumino thermic process. The notification itself contemplated such manufacture as eligible for exemption.

Conclusion: The exemption was available and the assessee succeeded on this issue.

Issue (ii): whether use of power in allied activities such as the blower, hoist or preparation of aluminium powder disentitled the goods from exemption.

Analysis: Power used in activities not directly participating in the manufacture of ferro alloys did not alter the character of the finished goods as being manufactured without the aid of power. The use of power in preparing aluminium powder, or in operating a blower or hoist, was held to be insufficient to deny exemption where the ferro alloys themselves were not manufactured with the aid of power. Subsequent exemption notifications also supported this understanding of the tariff scheme.

Conclusion: Such ancillary use of power did not defeat the exemption and the assessee succeeded on this issue.

Final Conclusion: The duty demand could not be sustained because the goods fell within the exemption for ferro alloys manufactured by the alumino thermic process without the aid of power, and the connected limitation contention was left undecided as unnecessary.

Ratio Decidendi: Where an exemption applies to goods manufactured without the aid of power, incidental or ancillary use of power in processes not directly forming part of the manufacture of the exempt goods does not by itself disqualify the goods from the exemption.

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