Exemption for final products preserved despite intermediate product arising during manufacture under Notification No. 53/88-C.E.

Exemption under Notification No. 53/88-C.E. could not be denied merely because an intermediate product, pre-expanded polystyrene, arose during manufacture and was not separately classifiable under the specified tariff headings. The notification applied to specified final products made from duty-paid inputs within the prescribed headings, and the intermediate stage formed part of the integrated manufacturing process leading to the exempt final product. Relying on trade notices and settled Tribunal decisions, CEGAT, Mumbai held that the mere emergence of an intermediate product does not defeat the exemption. The department's objection was therefore rejected and the exemption was held admissible.

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Issues: Whether exemption under Notification No. 53/88-C.E. could be denied merely because an intermediate product arose during the manufacture of the final product and was not itself classifiable under the specified tariff headings.

Analysis: The notification granted exemption to specified final products manufactured from duty-paid inputs falling within the prescribed tariff headings. The intermediate emergence of pre-expanded polystyrene in the course of manufacture did not defeat the exemption, since the material remained part of the integrated manufacturing process leading to the final product. The departmental view was unsupported by the trade notices and by the settled line of Tribunal decisions, which held that exemption cannot be refused solely on the ground that an intermediate product comes into existence during manufacture.

Conclusion: The exemption was held to be admissible, and the department's objection was rejected.

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