Nil-duty inputs do not defeat exemption where a Board circular and similar judicial interpretation support the claim.

Exemption for cast articles of aluminium and copper was examined against a condition that the final products be manufactured from inputs on which excise or countervailing duty had already been paid. The Board's circular clarified that exemption could not be denied merely because the aluminium and copper ingots were cleared on nil duty, and the Supreme Court had applied the same approach in similar circumstances. As the departmental orders were contrary to that circular and the notification was covered by its illustration, denial of exemption was held unsustainable and the assessee's claim was accepted.

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Issues: Whether cast articles of aluminium and copper were entitled to exemption under the notifications when the aluminium and copper ingots used as inputs had been cleared without payment of duty, in the light of the Board's circular and the Supreme Court's interpretation of similar exemption conditions.

Analysis: The exemption condition was that the final products should be manufactured from goods on which duty of excise or countervailing duty had already been paid. The Board had issued a circular clarifying that such exemption could not be denied merely because the inputs had been cleared on nil duty, and the Supreme Court had applied the same principle in similar circumstances. Since the departmental orders proceeded contrary to the Board's instructions and the relevant notification was covered by the circular's illustration, the denial of exemption was not sustainable.

Conclusion: The appellants were entitled to the exemption, and the demand of duty could not be sustained.

Final Conclusion: The impugned orders were set aside and the assessee's claim to exemption was accepted.

Ratio Decidendi: Where a Board circular clarifies that an exemption tied to goods on which duty has already been paid cannot be denied merely because the inputs were cleared without duty, the departmental authorities must follow that instruction and the exemption cannot be refused on the ground of nil-duty inputs.

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