Non-duty paid inputs defeat exemption under Notification No. 202/88-C.E. where returned moulds had become scrap

Unusable moulds returned for remanufacture ceased to retain their character as moulds and became scrap with metal value. The relevant test under Notification No. 202/88-C.E. was whether the inputs were clearly recognisable as non-duty paid; on the facts, the returned material had not suffered duty at the supplier's end, so the proviso applied and the notification's benefit was unavailable. The Tribunal therefore held that the exemption could not be claimed for the non-duty paid inputs.

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Issues: Whether the benefit of Notification No. 202/88-C.E. was available where unusable moulds returned for remanufacture were treated as inputs clearly recognisable as non-duty paid.

Analysis: The Tribunal held that once the moulds had become unusable, they ceased to retain their character as moulds and were only scrap with metal value. The relevant consideration under the notification was whether the inputs were clearly recognisable as non-duty paid. On the facts, the returned material had not suffered duty at the supplier's end, and the proviso to the notification was therefore attracted. The notification was intended to avoid cascading duty, but its benefit was unavailable where the inputs were non-duty paid.

Conclusion: The benefit of Notification No. 202/88-C.E. was not available to the assessee.

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