Conditional excise exemption survives where a duly filed option is not withdrawn, despite later payment at full duty rate.

A conditional excise exemption under Notification No. 9/98-C.E. remained available where the manufacturer exercised the required written option before the first clearance and that option could not be withdrawn during the rest of the financial year. The manufacturer had communicated the option on 09.06.1998, satisfying the notification's precondition. Continued payment of duty at the full rate for some time after exercising the option did not permit the Revenue to treat the option as ineffective or as having been withdrawn. The exemption therefore continued to apply.

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Issues: Whether the benefit of Notification No. 9/98-C.E. dated 02.06.1998 could be denied on the ground that the manufacturer, after exercising the option to avail the exemption, continued to pay duty at the full rate for some time.

Analysis: Paragraph 2(1) of the notification required a manufacturer commencing first clearances in the financial year 1998-99 on or after 02.06.1998 to exercise the option in writing before the first clearance, and the option, once exercised, was not to be withdrawn during the remaining part of the financial year. The manufacturer had in fact exercised the option by a letter received by the Department on 09.06.1998. Once the option was exercised, there was no scope for the Revenue to insist that the manufacturer should be treated as having opted out merely because duty had continued to be paid at the full rate for a period thereafter.

Conclusion: The exemption under Notification No. 9/98-C.E. remained available, and the Revenue's challenge failed.

Ratio Decidendi: Where a conditional exemption notification requires prior written exercise of option and prohibits withdrawal for the rest of the financial year, a duly exercised option cannot be treated as ineffective merely because duty was paid at the full rate for a subsequent period.

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