Duty-paid scrap retains its character for conditional exemption, so the exemption claim was upheld.

Conditional exemption for goods made from duty-paid scrap remained available where copper scrap arose from material originally cleared as duty-paid. The Tribunal treated scrap generated in manufacture from duty-paid scrap as retaining its duty-paid character, even though it was later cleared under a separate exemption notification. It distinguished prior authority dealing with an unconditional exemption and non-duty-paid goods, and found that decision inapplicable on these facts. The exemption under Notification No. 61/83 was therefore available, and the departmental challenge to the exemption claim was rejected.

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Issues: Whether the assessee was entitled to exemption under Notification No. 61/83 dated 01.03.1983 when the copper scrap used in manufacture arose from duty-paid scrap cleared under Notification No. 177/88 dated 13.03.1988.

Analysis: The exemption under Notification No. 61/83 was a conditional one meant for small scale industries and was available to goods made from duty-paid scrap. The Tribunal accepted the view that scrap generated in the course of manufacture from duty-paid scrap does not lose its character as duty-paid material merely because it is later cleared under Notification No. 177/88. The earlier decision relied upon by the department concerned an unconditional exemption and non-duty-paid goods, which made it inapplicable to the present facts.

Conclusion: The assessee was entitled to the benefit of Notification No. 61/83, and the department's appeal failed.

Final Conclusion: The exemption claim was upheld on the footing that the input material retained its duty-paid character, so the departmental challenge to the classification and exemption was rejected.

Ratio Decidendi: Where a conditional exemption is confined to products made from duty-paid scrap, scrap generated from such duty-paid material continues to satisfy that condition and cannot be treated as non-duty-paid merely because it is cleared under another exemption notification.

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