Exemption for soap cleared as soap cannot be denied merely because buyers later reprocessed it outside the factory.

A manufacturer clearing goods as soap was entitled to exemption under Notification No. 46/89 because the department itself had accepted the product under Tariff Heading 3401.10 and assessed it as soap. Once the goods emerging from the factory answered the description of soap and were cleared on that basis, the exemption could not be denied merely because buyers later processed them into smaller marketable forms outside the factory. The denial on the ground that condition No. 2 was not fulfilled was therefore incorrect.

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Issues: (i) Whether the assessee was entitled to the benefit of Notification No. 46/89 despite the finding that condition No. 2 was not fulfilled.

Analysis: The notification granted a concession to a manufacturer who manufactures soap and clears it from the factory as soap. The assessee's product was accepted by the department as soap under Tariff Heading 3401.10 and was cleared on payment of duty as soap. Once the authorities treated the goods as soap for assessment and clearance, the department could not deny the notification benefit on the footing that further processing by buyers outside the factory meant that all processes for manufacture of soap had not been carried out. The product that emerged in the assessee's factory answered the description of soap, and the fact that it was later made into smaller marketable forms did not defeat the exemption.

Conclusion: The assessee was entitled to the benefit of the notification, and the denial based on non-fulfilment of condition No. 2 was incorrect.

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