SSI exemption cannot be denied merely because full duty was paid on some clearances without breaching an express condition.

An SSI exemption notification requiring a written option before the first clearance and prohibiting withdrawal during the financial year was construed as not being breached merely because the manufacturer paid full duty on some clearances while claiming concessional duty on others. The Tribunal noted that the notification contained no term treating such full-duty payments as an opt-out from the exemption scheme, and the show cause notices did not allege any wrongful passing of credit or other specific violation. Reading the notification as a whole, it held that mere excess duty payment, without breach of an express condition, cannot defeat exemption entitlement. The demand and penalty were therefore unsustainable.

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Issues: Whether an assessee who had opted for an SSI exemption notification and paid duty at the concessional rate on some clearances could be treated as having withdrawn from the notification or violated its conditions merely because it also paid full duty on other clearances during the same financial year.

Analysis: The exemption notification required a manufacturer to exercise an option in writing before the first clearance and barred withdrawal of that option during the remainder of the financial year. The Tribunal held that the notification did not contain any stipulation that payment of full duty on certain consignments would amount to opting out of the exemption scheme. The show cause notices also did not allege any wrongful passing of credit or any other breach of the notification. A notification granting exemption must be read as a whole, but mere excess payment of duty, without any violation of a condition expressly laid down in the notification, cannot by itself defeat the exemption or justify denial of its benefit.

Conclusion: The assessee was entitled to retain the benefit of the exemption notification, and the demand and penalty could not be sustained.

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