Exemption notification conditions and Modvat credit bar: use of credit on another factory product defeats the exemption claim.

An exemption under Notification No. 5/98-C.E. was unavailable where the manufacturer had availed Modvat credit on inputs used for another product made in the same factory. Condition No. 10 expressly barred credit under Rule 57A or Rule 57B not only on the notified goods but also on any other product manufactured in the same factory. The wording was held clear and unambiguous, so breach of that condition was sufficient to deny the exemption. The narrower reading urged by the assessee was rejected because the notification extended beyond the exempted goods to all products in the factory.

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Issues: Whether the appellants were entitled to exemption under Notification No. 5/98-C.E. dated 2-6-98 when they had availed Modvat credit in respect of another product manufactured in the same factory, thereby attracting Condition No. 10 of the notification.

Analysis: Condition No. 10 barred availment of credit of duty paid under Rule 57A or Rule 57B either on the products covered by the notification or on any other product manufactured in the same factory. The appellants were admittedly availing Modvat credit for inputs used in PTFE Braided Packing manufactured in the same factory. The condition was held to be clear and unambiguous, and its breach was sufficient to deny the exemption. The contention that the condition applied only to the exempted products was rejected because the wording extended to other products manufactured in the same factory as well.

Conclusion: The exemption was rightly denied and the appeal failed.

Ratio Decidendi: Where an exemption notification expressly makes non-availment of Modvat credit on any other product manufactured in the same factory a condition for the benefit, violation of that condition disentitles the manufacturer from claiming the exemption.

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