Excise exemption on cleared goods survives delayed inspection notes where physical inspection was completed before dispatch.

Exemption under Notification No. 14/92-C.E. continued to apply where HDPE pipes were physically inspected before dispatch and cleared on 28-2-94 during the exemption period. Delayed issuance of inspection notes under the rate contract, recorded only later on 7-3-94, did not change the fact that clearance had already occurred and did not defeat the exemption. A demand treating the inspection note date as the date of clearance was not sustainable, and the Rule 224 objection was irrelevant because it was not the basis of the show-cause notice. The assessee was therefore entitled to exemption and no duty or penalties could be sustained.

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Issues: Whether excise duty was payable on HDPE pipes cleared on 28-2-94 during the currency of exemption merely because the inspection notes under the rate contract were issued later on 7-3-94, and whether delayed issuance of inspection notes could deprive the assessee of the exemption.

Analysis: The goods were cleared on 28-2-94, when Notification No. 14/92-C.E. granting exemption was still in force. The goods had already been physically inspected in terms of the rate contract, and the subsequent inspection notes only recorded and ratified the earlier inspection. The contractual requirement was satisfied by prior inspection before dispatch, and the later issuance of inspection notes did not alter the fact that clearance had taken place during the exemption period. The demand based on treating the date of inspection note as the date of clearance was therefore not sustainable. The objection based on Rule 224 of the Central Excise Rules, 1944 was not accepted because it was not the basis of the show-cause notice.

Conclusion: The assessee was entitled to the exemption and no duty was payable on the goods cleared on 28-2-94; the demand and penalties could not be sustained.

Ratio Decidendi: Where excisable goods are cleared during the period of exemption after the required inspection has already been completed, delayed issuance of inspection notes under a rate contract does not defer the date of clearance or defeat the exemption.

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