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Even if assessee pays duty on clearance of final products which are exempted under Exemption Notification, goods continue to remain “exempted goods” and do not become “other than exempted goods” for the purpose of Notification No.89/95-CE dated 18/05/1995.
Facts:
The assessee manufactures excisable goods falling under Chapter 86. During the disputed period, though it was entitled for exemption under Notification No.62/95- CE dated 16/03/1995, it cleared the exempted goods on payment of duty. It however did not pay duty on ferrous and non-ferrous scrap since as per Notification No.89/95- CE dated 18/05/1995, waste parings and scrap arising in the course of manufacture of exempted goods and falling within the schedule to the Central Excise Tariff Act, 1985, were exempted from the whole of excise duty. Department issued show cause notice demanding duty on the ground that as per the proviso to the said notification, such exemption would not be applicable if waste parings and scrap cleared from a factory in which any other excisable goods other than exempted goods are also manufactured. The case of the department was that since assessee cleared the goods after payment of duty and did not avail benefit of exemption notification No.62/95- CE, the goods cleared from factory cease to be exempted goods and hence benefit of notification No.89/95-CE is also not allowed to assessee. The Tribunal decided in favour of assessee
Held:
The High Court observed that erroneous payment of duty caused the department to hold that the goods are other than exempted goods and therefore demand was made. Affirming the Tribunal’s order it was held that proviso to this Notification would not apply to the facts of the case and the erroneous payment of duty would not render the goods other than exempted goods. Hence, so long as the goods manufactured are exempted goods, waste parings, scrap arising in the course of the manufacture of exempted goods would be entitled for the exemption.
