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Issues: Whether the assessee was entitled to the benefit of Notification No. 121/94-C.E. notwithstanding non-compliance with Chapter X procedure, and whether the demand could survive in view of revenue neutrality arising from credit being taken by the recipient unit.
Analysis: The benefit of the exemption notification had already been accepted in favour of the assessee by the appellate authority and the dispute on eligibility stood settled. The denial in the impugned order rested only on non-observance of Chapter X procedure. The procedure could not be insisted upon in the facts, because the assessee had been denied the benefit of the notification by the department itself during the relevant period, and the goods were admittedly received by the other unit, which had taken credit of the duty paid. The situation was therefore revenue neutral, and the assessee derived no benefit from any alleged undervaluation.
Conclusion: The assessee was entitled to the exemption and the demand based on alleged non-compliance with Chapter X procedure could not be sustained.
Final Conclusion: The impugned order was set aside and the appeals succeeded on the ground that procedural objections could not defeat the substantive exemption claim, especially in a revenue-neutral situation.
Ratio Decidendi: Where exemption eligibility stands accepted and the department itself prevented compliance with the prescribed procedure during the relevant period, denial of the exemption solely for procedural non-observance is unsustainable, particularly when the transaction is revenue neutral.
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