Input duty set-off for paper products does not require strict one-to-one correlation with final goods.

Notification No. 225/86-C.E., as amended, allows exemption from duty on paper and paper board to the extent of excise duty paid on specified inputs used in or in relation to manufacture. The benefit operates as an abatement against duty on the final products, so a strict one-to-one correlation between particular input lots and corresponding finished goods is not required at every stage of clearance. The inputs must nevertheless have been actually used in or in relation to manufacture of the notified goods, and the exemption is limited to duty paid on such inputs. The one-to-one objection was rejected and the matter was remanded for verification of actual use and grant of the notification benefit if satisfied.

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Issues: Whether the benefit of Notification No. 225/86-C.E. could be denied on the ground that the set-off of duty on inputs had to be matched one-to-one with the final products manufactured from those inputs.

Analysis: Notification No. 225/86-C.E., as amended by Notification No. 329/86-C.E., grants exemption from duty on paper and paper board to the extent of the excise duty paid on specified inputs used in or in relation to manufacture. The controlling principle is that the benefit is available as an abatement on the duty payable on the final products, and it is not necessary at every stage of clearance to establish a strict co-relation between a particular lot of inputs and the corresponding final goods. At the same time, the inputs must in fact be used in or in relation to the manufacture of the notified final goods, and the quantum of exemption is confined to the duty paid on such used inputs.

Conclusion: The one-to-one co-relation objection was rejected, and the matter was remanded to verify whether the inputs were used in or in relation to the manufacture of the notified final products and to extend the notification benefit if that requirement is satisfied.

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