Input-output correlation under exemption notifications need not be lot-wise where the input is used in manufacture of final products.

Notification No. 432/86-C.E. was construed as granting exemption to the extent of duty already paid on Napthalene used in manufacturing the final product, without any express or implied requirement of lot-wise or one-to-one correlation between each input quantity and the finished dye intermediates cleared from the factory. The interpretation was supported by Delhi High Court reasoning on similar notification language and by a Larger Bench view that such exemption provisions do not mandate exact correlation between inputs and output lots. On that basis, one-to-one correlation was held unnecessary, and the issue was decided in favour of the assessee.

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Issues: Whether, for availing the benefit of Notification No. 432/86-C.E., one-to-one co-relation was required between the input Napthalene and the finished dye intermediates.

Analysis: The notification granted exemption to the extent of duty already paid on Napthalene used in the manufacture of the final product. Its language required only that the inputs be used in the manufacture of the final products. There was no express or implied requirement that the exemption had to be confined to the exact quantity of inputs contained in a particular lot of final goods cleared from the factory. The interpretation adopted by the Delhi High Court in relation to similar notification language, and the Larger Bench view that such notifications do not mandate lot-wise correlation between inputs and final products, supported this construction.

Conclusion: One-to-one co-relation was not required. The issue was decided in favour of the assessee.

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