Conditional set-off under exemption notification fails where proof of manufacture from duty-paid specified inputs is not established.

A concessional set-off under Notification No. 237/76 was available only where the assessee proved to the satisfaction of the proper officer that the hand-knitting yarn had been manufactured out of duty-paid wool tops. The record did not establish that the yarn cleared after 30-8-1976 was made directly from duty-paid wool tops; instead, the accepted position was that it was manufactured out of duty-paid grey yarn on which proforma credit had already been taken. The notification's condition was therefore not fulfilled, and the denial of set-off was upheld in favour of Revenue.

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Issues: Whether the assessee was entitled to set-off under Notification No. 237/76 in respect of hand-knitting yarn cleared after 30-8-1976 on the footing that it was manufactured out of duty-paid wool tops.

Analysis: The notification granted set-off only if it was proved to the satisfaction of the proper officer that the yarn had been manufactured out of duty-paid wool tops. The assessee had already availed proforma credit on duty-paid grey yarn received from spinners, and the record did not establish to the Assistant Collector's satisfaction that the yarn lying in stock and cleared after 30-8-1976 was manufactured directly out of duty-paid wool tops. On the reasoning accepted, the yarn was manufactured out of duty-paid grey yarn, so the condition attached to the notification was not fulfilled.

Conclusion: The assessee was not entitled to the set-off, and denial of the claim was upheld in favour of Revenue.

Ratio Decidendi: Where a concessional exemption notification makes set-off conditional upon proof to the satisfaction of the proper officer that the goods were manufactured out of duty-paid specified inputs, the benefit cannot be granted unless that condition is affirmatively established.

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