Chapter X goods retain their status after notification withdrawal; removal for testing or processing remains permissible.

Goods received under Chapter X procedure pursuant to an exemption notification retained that character after withdrawal of the notification because they had been lawfully brought into the factory while the notification was in force. Rule 196-BB of the Central Excise Rules permitted such goods to be taken out for testing or for other operations necessary for completion of the industrial process, subject to return to the assessee's premises. On that basis, removal for further processing or testing remained permissible despite the later withdrawal of the exemption notification.

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Issues: Whether goods received under Chapter X procedure pursuant to an exemption notification continued to retain that status after withdrawal of the notification, and whether Rule 196-BB of the Central Excise Rules permitted their removal for further processing or testing.

Analysis: The goods were received in the factory when Notification No. 167/79 was in force and had accordingly been brought in under Chapter X procedure. Rule 196-BB specifically permits goods received under that procedure to be taken for testing or for carrying out any other operation necessary for completion of the industrial process and to be returned to the assessee's premises. Once the goods had been lawfully received under the notification and the Chapter X procedure, withdrawal of the notification did not alter the character of the goods as having been received under that procedure.

Conclusion: The withdrawal of Notification No. 167/79 did not deprive the goods of their Chapter X status, and removal under Rule 196-BB was permissible. The issue was decided against the Revenue and in favour of the assessee.

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