1. Notification No. 201/79-C.E., dated 4-6-79 exempted all excisable goods, on which the duty of excise was leviable and in the manufacture of which any goods falling under Item 68 of the Central Excise Tariff had been used, from so much of the duty of excise leviable thereon as was equivalent to the duty of excise already paid on Item 68 goods, subject to the procedure laid down in the notification. This notification was amended on 28-2-82 by Notification No. 105/82-C.E. to the effect that the exemption became available only where Item 68 goods were used as raw material and component parts in the manufacture of finished excisable goods. The point of dispute in this appeal is whether the appellants were entitled to the exemption in respect of Item 68 duty paid on graphite rods which they used for manufacturing diamond drill bits, both before and after the amendment dated 28-2-82.
2. The following paragraph extracted from the Order-in-Original in this case explains the process of manufacture of the appellants :- "M/s. Rockdril (India) Jodhpur bring Graphite rods falling under T.I. 68. Out of Graphite rods, graphite mould is prepared in which other components/raw materials such as steel shanks, binders and diamonds etc. are put and then entire assembly is put in the furnace. At high temperature diamonds are transferred on steel shanks & then these are separated from mould. This mould in the process is rendered useless and is treated as waste and is not re-used." 3. It is clear from the above process that graphite moulds prepared from graphite rods are used as a vessel or container, that is, as a piece of manufacturing equipment and apparatus and not as raw material or component part. Since from 28-2-82, the exemption was admissible only in respect of Item 68 goods used as raw material and component parts, we hold that on and from 28-2-82 the appellants were not entitled to the benefit of the aforesaid exemption. The demand made on them for payment of the duty for the period on and from 28-2-82 was within the prescribed time-limit under Section 11A and we uphold its validity. As regards the earlier period, the notification contained no condition that Item 68 goods should be used as raw material and component parts. On the other hand, it gave the exemption in respect of "any goods" falling under Item 68 which were used in the manufacture of other dutiable goods. There is, therefore, no substance in the insistence of the Assistant Collector that the earlier exemption was admissible only in respect of those Item 68 goods which became constituent part of the finished dutiable goods. The Appellate Collector has also taken virtually the same ground but worded it differently saying that in the appellants' case the graphite rods/moulds were used in connection with the manufacture of or for the manufacture of diamond drill bits, but not in the manufacture of the drill bits. It is clear from the process of manufacture that diamond drill bits cannot be manufactured without the use of graphite rods/moulds. The finding of the Appellate Collector has also, therefore, no substance. During the hearing before us, the Department's representative raised yet one more objection saying that scrap graphite resulting after use of the graphite mould had some economic value and so it could not be said that graphite rod mould had been used up in the process of manufacture. We find no such condition embodied in the exemption notification. It is quite evident from the process of manufacture that after being used, the graphite mould is broken up and cannot be re-used. We, therefore, hold that in terms of the language used in the pre-amended notification, the graphite rods/moulds were used in the manufacture of other dutiable goods and the appellants were thus entitled to the exemption upto 27-2-82. The demand for duty made on them in respect of the period upto 27-2-82 in set aside.
4. Accordingly, the appeal is allowed in respect of the demand for the period upto 27-2-82 and is rejected in respsct of the period thereafter.