Express exclusion in exemption notification bars relief for factories with single-yarn production facilities, while Modvat credit remains undisturbed.

An exemption notification could not be applied where the factory admittedly had facilities, including plant and equipment, for producing single yarn, because the notification expressly excluded such clearances. The exclusion operated directly against the assessee, so the benefit under Notification No. 35/95, as amended, was denied. Modvat credit on duty paid on single yarn used in making double or multifolded yarn was sustained because that finding was not challenged and no basis existed to disturb it. The result was partial success for the Revenue on the exemption issue, while the credit-related relief remained intact.

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Issues: (i) Whether the assessee was entitled to the benefit of Notification No. 35/95, dated 16.03.1995, as amended by Notification No. 84/95, dated 18.05.1995, when its factory had facilities for producing single yarn. (ii) Whether Modvat credit taken on duty paid on single yarn used in the manufacture of double or multifolded yarn was allowable.

Issue (i): Whether the assessee was entitled to the benefit of Notification No. 35/95, dated 16.03.1995, as amended by Notification No. 84/95, dated 18.05.1995, when its factory had facilities for producing single yarn.

Analysis: The exemption notification contained an express proviso excluding clearances of yarn from a factory having facilities, including plant and equipment, for producing single yarn. The assessee's factory admittedly had such facilities, and the exclusion operated directly against grant of the exemption. The appellate authority had overlooked this proviso.

Conclusion: The assessee was not entitled to the exemption under the notification, and the Revenue succeeded on this issue.

Issue (ii): Whether Modvat credit taken on duty paid on single yarn used in the manufacture of double or multifolded yarn was allowable.

Analysis: The finding allowing Modvat credit on the duty paid on single yarn was not challenged by the Revenue. No reason existed to disturb that part of the order.

Conclusion: The assessee's entitlement to Modvat credit was sustained.

Final Conclusion: The impugned order was modified by denying the exemption benefit while sustaining the Modvat credit finding, resulting in partial success of the Revenue appeals.

Ratio Decidendi: Where an exemption notification contains an express exclusion clause, the benefit cannot be extended to a factory falling within that exclusion, even if credit-related relief is otherwise unaffected.

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