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Issues: (i) Whether duty set-off under Notification No. 225/86-C.E. was available on inputs used in manufacture of goods exported under bond and later adjusted against duty on clearances for home consumption; (ii) Whether the demand was barred by limitation and the extended period was invocable.
Issue (i): Whether duty set-off under Notification No. 225/86-C.E. was available on inputs used in manufacture of goods exported under bond and later adjusted against duty on clearances for home consumption.
Analysis: The Notification granted exemption to the final product to the extent of duty already paid on the inputs. The governing principle, as applied from the larger Bench view, was that the Notification did not require batch-wise or one-to-one co-relation between particular lots of inputs and particular clearances of final product. Goods exported under bond were not to be treated as exempted goods or goods chargeable to nil rate of duty. Once the exported clearances did not lose their excisable character, the credit or set-off on the inputs could be utilised against duty payable on the goods cleared for home consumption.
Conclusion: The set-off was admissible and the disallowance was unsustainable.
Issue (ii): Whether the demand was barred by limitation and the extended period was invocable.
Analysis: The record showed that the department was aware of the manufacturing process, the clearances, the credit taken, and its utilisation. The facts were reflected in the statutory records and returns, and there was no material showing suppression of facts or intent to evade duty. In the absence of such intent, the extended period could not be invoked.
Conclusion: The demand was time-barred and the extended limitation was not available.
Final Conclusion: The impugned order was set aside, and the appeal succeeded with consequential relief.
Ratio Decidendi: Under a notification granting exemption to the final product to the extent of duty paid on inputs, utilisation of such credit does not depend on one-to-one co-relation between inputs and output, and goods exported under bond are not to be treated as exempted goods; the extended period of limitation requires proof of suppression or intent to evade duty.
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