2000 (9) TMI 567 - AT - Central Excise

Summary

Issues:
1. Benefit of Notification No. 217/86-C.E. extended to 'Acetylene Gas' in manufacturing dutiable items.
2. Denial of benefit for 'Acetylene Gas' used in manufacturing machinery parts for captive use in repairs and maintenance.
3. Denial of benefit for 'Acetylene Gas' used for cutting resulting in scrap cleared at nil rate of duty.

Analysis:

Issue 1:
The authorities extended the benefit of Notification No. 217/86-C.E. to 'Acetylene Gas' used in manufacturing dutiable items. However, the benefit was denied for 'Acetylene Gas' used captively in manufacturing machinery parts used for repairs and maintenance, as no duty was paid on those parts. The benefit was also denied for 'Acetylene Gas' used for cutting, resulting in scrap cleared at nil rate of duty.

Issue 2:
Under Notification No. 217/86, goods are exempted when used within the factory of production for manufacturing final products specified. The proviso states that the exemption does not apply to inputs used for products exempt from duty or charged at nil rate. The contention that machinery parts are intermediate goods and not final products was rejected as no duty payment evidence was provided for the products where the parts were used.

Issue 3:
Regarding 'Acetylene Gas' used in manufacturing scrap, the proviso allows exemption if used in a different factory, subject to Chapter X Procedure. The argument that if scrap cleared at nil duty rate was used in another factory, the benefit should apply was dismissed. The proviso covers inputs used captively, not final products. As the scrap was the final product, and cleared at nil rate, the benefit of the notification was deemed unavailable.

In conclusion, the appeal was rejected as 'Acetylene Gas' did not meet the conditions of Notification No. 217/86 due to its use in manufacturing scrap cleared at nil rate of duty. The proviso did not apply as the gas was used in the factory of production, and the exemption was contingent on observance of Chapter X Procedure for use in a different factory.