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TMI Blog1986 (12) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... n 20/72 dated 4.2.72 in respect of varnishes manufactured by them. The varnish stated to have escaped payment of duty was being captively consumed by them and was being utilised for manufacture of other paints and enamels in respect of which they had claimed the benefit of the exemption notification 80/80. Under this notification subject to the satisfaction of various conditions of the notification, specified goods cleared upto value of 7.5 lakhs were exempted from payment of duty. Notification No. 20/72 is conditional notification and the benefit of exemption under this notification is available in respect of varnish etc subject to the satisfaction of the following condition : "Provided that no such exemption shall be allowed in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and utilised captively in the manufacture of paints etc., in their units were exempted from the payment of duty in terms of notification 80/80 as amended by notification No. 123/80 dated 18.7.1980. This notification in terms of Exp. VI added to Notification No. 80/80, the Notification No. 123/80 is reproduced for facilitating their reference : "GSR.435(3), In exercise of the powers conferred by Sub-rule (I) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following amendment into Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 80/80 - Central Excise dated the 19th June, 1980, namely : In the said Notification, after Explanation V, the following explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of calculating the value of clearances under 80/80. 4. The question that arises for consideration is that if the clearances of such goods are not taken into account for the purpose of calculating the value of clearances whether they will automatically stand exempted under Notification No. 80/80 under which specified goods cleared upto a slab of 7.5 lakhs were totally exempted. Now paints that have been manufactured out of these varnishes had been cleared without the payment of duty upto a limit of 7.5 lakhs. In terms of amended Rule 9 & 49, varnishes for captive consumption are also deemed to have been cleared for home consumption and they were liable to pay duty unless otherwise exempted. Now under Notification 80/80, there is no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.80 as subsequently amended by Notification Nos. 50/81 CE dated 1-3-81, 73/81 CE dated 25-3-81 and 123/80 CE dated 18-7-80 it is seen that it is a concession on value of clearances to small scale manufacturers of specified goods. It grants exemption from whole of duty of excise in respect of first clearances of the specified goods of an aggregate value not exceeding 7.5 lacs and thereafter there is a partial concession on clearances between 7.5 lacs upto 15 lacs. For emphasis material portion of the opening part is extracted below : "..... the Central Government hereby exempts the excisable goods of the description specified in column (3) of the Table hereto annexed (hereinafter referred to as the "specified goods") and falling under such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculating the value of clearances. It is well to remember that under Rule 8 of Central Excise Rules, 1944 the Central Government may by notification in the Official Gazette exempt (subject to such conditions as may be specified in the notification) any excisable goods from the whole or any part of duty leviable on such goods. The mode of calculation must be held relatable to 'conditions' of the notification in exercise of this power. I see considerable force in the argument of the appellants that the value of inputs is included in the value of finished products and if duty were demanded on inputs, other conditions of the notification being fulfilled, it will mean, in substance, denial of exemption to small scale manufacturers. 7. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jha) Vice President (J) Dated : 5.11.1986 Sd/- (Harish Chander) Member (J) 9. In accordance with the decision of majority, the appeal is allowed and the demand against the appellant set aside. Sd/- (V.P. Gulati) Member (T) Sd/- (S.D. Jha) Vice-President (J) Dated : 17-12-1986 Sd/- (Harish Chander) Member (J) EDITOR'S COMMENTS The minority view appears to be correct. The question is if varnish manufactured and used for captive consumption is leviable to duty and not if the value of such varnish should be excluded in the computation of the aggregate value of specified goods cleared. Exclusion from the computation of value of the specified goods cannot be equated with an exemption from levy altogether on the goods capti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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