Factory-linked exemption for tea manufacturing applies only within the same factory; separate factories cannot claim the linked concessional benefit.

An exemption for tea used in manufacture applied only when black tea and package tea were produced in the same factory; it did not extend to goods moved between separate factories of the same manufacturer. On that reading, the concessional benefit under the linked notification, which depended on duty being payable on black tea and no credit being taken, could not be claimed where the foundational exemption was unavailable. The department's interpretation was therefore preferred, and the exemption claim based on separate-factory manufacture was rejected.

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Issues: (i) whether Notification No. 217/86 applied where black tea and package tea were manufactured in different factories owned by the same manufacturer; (ii) whether, for the purpose of Notification No. 193/86, the duty "payable" on black tea had to be determined after giving effect to the exemption under Notification No. 217/86.

Issue (i): whether Notification No. 217/86 applied where black tea and package tea were manufactured in different factories owned by the same manufacturer.

Analysis: The exemption covered tea manufactured in a factory and used within the factory of production in or in relation to the manufacture of the final product. The expression was construed to require that the black tea and the package tea be manufactured in the same factory. The assessee's interpretation would leave no satisfactory basis in the notification for the movement of black tea between separate factories, whereas the departmental reading gave effect to the words used in the exemption.

Conclusion: Notification No. 217/86 applied only where black tea and package tea were manufactured in the same factory and not where they were manufactured in two different factories, even if owned by the same manufacturer.

Issue (ii): whether, for the purpose of Notification No. 193/86, the duty "payable" on black tea had to be determined after giving effect to the exemption under Notification No. 217/86.

Analysis: The benefit under Notification No. 193/86 depended on the duty payable on black tea having already been paid and no credit having been taken. Since the exemption under Notification No. 217/86 was not available on the facts, the premise that black tea stood exempt for this purpose failed.

Conclusion: The assessee was not entitled to treat the duty on black tea as exempt for the purpose of Notification No. 193/86.

Final Conclusion: The departmental appeal succeeded and the exemption claim based on manufacture in separate factories was rejected.

Ratio Decidendi: An exemption confined to goods manufactured in a factory and used within the factory of production is available only when the relevant inputs and final product are manufactured in the same factory; the phrase "duty payable" in a concessional notification does not extend to a situation where the foundational exemption is inapplicable.

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