Exemption attaches on factory clearance, and post-clearance end-use conditions do not defeat accrued relief after withdrawal.

Exemption for tyres and tubes was treated as attaching at the time of clearance from the manufacturer's factory, so a later withdrawal of the notification did not defeat the benefit already accrued on the 13 consignments cleared while the exemption was in force; the end-use condition was regarded as a post-clearance requirement, and duty could not be demanded from the appellant for those clearances. For the five consignments cleared after withdrawal, Rule 196 was held inapplicable against the end-user because it governs goods not duly accounted for under the Chapter X procedure, and any liability lay with the clearing manufacturer rather than the appellant.

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Issues: (i) Whether exemption for tyres and tubes under the relevant notifications was available where the goods were cleared from the manufacturer before withdrawal of the exemption but received and used by the appellant after withdrawal; (ii) Whether duty on five consignments cleared by the tyre manufacturer after withdrawal of the exemption could be demanded from the appellant under Rule 196 of the Central Excise Rules, 1944.

Issue (i): Whether exemption for tyres and tubes under the relevant notifications was available where the goods were cleared from the manufacturer before withdrawal of the exemption but received and used by the appellant after withdrawal of the exemption.

Analysis: The exemption was held to attach at the stage of clearance from the manufacturer's factory. The condition that the tyres and tubes should be used in the manufacture of saloon cars was treated as a post-clearance condition. Since the notifications were in force when the 13 consignments were cleared, the subsequent withdrawal did not take away the benefit already accrued at the time of removal.

Conclusion: The exemption remained available to the 13 consignments and duty could not be demanded from the appellant in respect of those clearances.

Issue (ii): Whether duty on five consignments cleared by the tyre manufacturer after withdrawal of the exemption could be demanded from the appellant under Rule 196 of the Central Excise Rules, 1944.

Analysis: The demand under Rule 196 was held to be unsustainable against the appellant because that rule operates in respect of goods not duly accounted for under the Chapter X procedure. Where the manufacturers cleared the tyres after the exemption had ceased, the liability, if any, was held to lie against the manufacturers who effected the clearances, not against the appellant end-user. The trade notice relied upon was also treated as supporting this view.

Conclusion: The duty demand on the five consignments was not recoverable from the appellant under Rule 196.

Final Conclusion: The appeal succeeded in full and the demand and consequential order against the appellant were set aside.

Ratio Decidendi: Exemption under a notification is determined at the time of clearance from the manufacturer, and an end-use requirement is only a post-clearance condition; where goods are cleared without exemption after withdrawal, any duty liability must be fastened on the clearing manufacturer and not on the end-user under Rule 196.

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