Per Shri V.P. Gulati :

The issue in the appeal relates to the benefit of Notification 202/88 under which the goods in question would be entitled to benefit of the exemption except in the event where the inputs used for the same are clearly recognisable as non-duty paid. The learned lower authority has held that the appellants had used the input material as set out in the notification and the same was clearly recognisable as non-duty paid and has, therefore, denied the benefit of the exemption notification.

2. The learned Advocate for the appellants while conceding that in a similar case the Tribunal has taken a view that in a case like that of the appellants, the benefit of notification has been held to be not available. He has pleaded that he has some fresh pleas to make in this regard. Narrating the facts of the case, he has pleaded that the appellants are manufacturers of moulds and the buyers of the moulds after they have used the same over a period of time and when the moulds have become unusable, they send the same back to the appellants for manufacture of the moulds out of the material of the mould which has been rendered unusable and which has been returned to them. He has also pleaded that the unusable moulds which are returned to the appellants also emerge out of the moulds which had been purchased by the customers from other manufacturers also. The learned Advocate has pleaded that before the benefit of notification could be denied, the authorities must establish that the input materials were cleared as such and which were required otherwise to suffer duty but had not suffered the same. His plea is that the benefit of notification is contingent upon the department being able to prove that the input material had not suffered duty. He has pleaded, in the present case as it is the moulds which had become unusable as such were returned and, therefore, the returned unusable moulds could be taken as duty paid moulds. By virtue of their becoming unusable they did not loose the character of duty paid material. He has pleaded, may be the unusable mould had only scrap value, but by becoming unusable it did not loose its character as a duty paid item. He has pleaded, as it is there is no finding that the unusable mould was chargeable to duty and for that reason, therefore, duty not having been paid, the mis-chief of the proviso to the notification would be attracted. He has, therefore, pleaded that the appellants would be entitled to the benefit of the notification.

3. Heard the learned JDR for the department. He has pleaded that the appellants having not been able to establish that the unusable moulds which were in the nature of scrap had suffered Central Excise duty and, therefore, the mis-chief of the proviso to the notification would be attracted. He has also pleaded that in case the duty has not been demanded on the unusable moulds which were in the nature of the scrap, that would not by itself change the character of the unusable mould as being non duty paid item. He has pleaded that the moment the item could not be used as a mould, it lost its character as such and became only a scrap. It was only out of this scrap, he pleaded that a new mould came to be manufactured. The scrap in question did not suffer any duty and, therefore, the question of giving the benefit of notification would not arise.

4. We have considered the pleas made by both the sides. We observe that the fact remains that the mould which had suffered duty could be used over a period of time and, thereafter, it became an unusable entity as mould. The only thing that could be done with it and which has been done in the present case was to melt the same and use the metal content in that for bringing out an useful mould into existence. We are not able to agree with the learned Advocate that the unuseful mould continued to retain the characteristics of the mould. The moment it became unuseful and it was reduced to a state where the entity had only the metal