Small scale exemption survives a clerical classification error where no conscious option to pay concessional duty was exercised.

An inadvertent or typographical error in the classification list did not defeat the assessee's claim to small scale exemption under Notification No. 1/93-CX where the clearances were actually made at nil duty from the outset and the revised classification list corrected the mistake. The record showed no conscious option to pay concessional duty instead of claiming exemption, so the substantive exemption benefit could not be denied on the basis of the clerical error. The duty demand and penalty were therefore unsustainable and were set aside.

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Issues: Whether the assessee was entitled to the small scale exemption under Notification No. 1/93-CX for the first clearances of Rs. 30 lakhs despite an incorrect statement in the original classification list, and whether duty demand and penalty could be sustained.

Analysis: The classification list showed a mistaken declaration of concessional duty at 15% instead of exemption for the first clearances. The clearances were, in fact, made at nil rate of duty from the outset, and the subsequent revised classification list corrected the inadvertent error. On these facts, there was no conscious exercise of an option to pay duty at concessional rate in place of exemption, and the assessee could not be denied the benefit merely because of the clerical mistake in the initial list.

Conclusion: The assessee was entitled to the exemption. The duty demand and the penalty were unsustainable and were set aside, in favour of the assessee.

Ratio Decidendi: An inadvertent or typographical error in the classification list does not defeat a substantive exemption claim where the assessee has not consciously opted for duty payment in lieu of the exemption and the factual conduct shows availing of the exempted rate.

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