Duty-paid intermediate goods do not defeat exemption where the basic raw material satisfies the notification conditions.

Sequins manufactured from duty-paid PVC films were treated as eligible for exemption under Notification No. 53/88-C.E. because the films themselves were made from duty-paid PVC resin falling within the relevant tariff headings. The exemption condition was regarded as satisfied where the basic raw material used in the manufacture of the finished product was duty-paid, and the presence of an intermediate manufacturing stage did not defeat the claim. Departmental clarification and Tribunal precedent were relied on to support the view that exemption cannot be denied merely because the product passed through an intermediate form before becoming the final goods.

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Issues: Whether sequins made from duty-paid PVC films, which in turn were made from duty-paid PVC resins, were eligible for exemption under Notification No. 53/88-C.E. dated 1-3-1988.

Analysis: The finished product was classified under Heading 3926.90 and was manufactured from PVC films. The PVC films were themselves manufactured from duty-paid PVC resins falling under Heading 3904.10. The condition in the notification was treated as satisfied because the basic raw material used in the manufacture of the finished product was a duty-paid material falling within the relevant headings. The emergence of an intermediate product did not defeat the exemption claim, and the relied-upon departmental clarification and Tribunal precedent supported that view.

Conclusion: The sequins were held eligible for the exemption under Notification No. 53/88-C.E. dated 1-3-1988, in favour of the assessee.

Ratio Decidendi: Where the finished product is manufactured from an intermediate product that is itself made from duty-paid material falling within the specified tariff headings, the exemption condition is satisfied and the benefit cannot be denied merely because of the intermediate stage of manufacture.

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