Nil duty under an exemption notification satisfied the prior duty condition for a later finished-product exemption on ropes.

Ropes made from sisal and manila yarn qualified for exemption under Notification No. 62/87-C.E. because the yarn had been captively used under Notification No. 49/90. Nil duty under a valid exemption notification was treated as sufficient discharge of the duty condition for the later exemption, even though no actual duty was paid on the yarn. The benefit of the rope exemption was therefore available, and the adverse view on this issue was set aside.

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Issues: Whether ropes manufactured out of sisal and manila yarn were entitled to the benefit of Notification No. 62/87-C.E. when the yarn used captively had been exempted under Notification No. 49/90.

Analysis: The captive use of yarn under Notification No. 49/90 was treated as satisfying the duty requirement for the subsequent product. The benefit of the rope exemption was therefore available notwithstanding that the yarn had not suffered actual duty payment, since nil duty under the exemption notification was regarded as appropriate payment of duty for the purpose of the later notification.

Conclusion: The assessee was entitled to claim the benefit of Notification No. 62/87-C.E. on the ropes, and the adverse portion of the order on this issue was set aside.

Ratio Decidendi: Nil duty discharge under a valid exemption notification can satisfy the condition of prior duty payment for claiming a subsequent exemption on the finished product.

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