Export under bond is not duty exemption for Notification 217/86; inputs remained eligible for the benefit.

Inputs used in the manufacture of finished goods exported under bond remained eligible for Notification No. 217/86 because export under bond without payment of duty is not, by itself, an exemption from duty or a nil-rate situation. The notification's proviso applied only where final products were wholly exempt from duty or chargeable at nil duty, and goods exported under bond did not fall within that exclusion. The effect was that the benefit of the notification continued to apply to such inputs, with the appeal allowed.

---

---

Issues: Whether the benefit of Notification No. 217/86 was available to inputs used in the manufacture of finished goods exported under bond.

Analysis: The proviso to the notification applies only where the final products are exempt from the whole of duty or are chargeable to nil rate of duty. Goods exported under bond without payment of duty are not, for that reason alone, exempt goods or goods chargeable to nil duty. Export under bond is permitted under the Central Excise Rules and does not amount to an exemption from duty.

Conclusion: The benefit of Notification No. 217/86 was available to the inputs used in the manufacture of goods exported under bond, and the appeal was allowed.

Ratio Decidendi: Export of goods under bond without payment of duty does not constitute exemption from duty or a nil rate of duty for the purpose of denying the benefit of an exemption notification.

---