Exempt clearances cannot be counted toward exemption limits merely because duty was mistakenly paid on otherwise exempt goods.

Goods wholly exempt under a separate notification remained excluded from the aggregate value of clearances used to test eligibility under Notification No. 175/86-CE. Mistaken payment of duty on those exempt goods did not change their exempt character, and the absence of a refund claim did not permit inclusion of that value for computing the exemption limit. The exemption scheme had to be applied on a correct computation of clearances, giving full effect to the notification once the goods fell within it. The assessee therefore remained entitled to the exemption on the proper exclusion of the exempt clearances.

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Issues: Whether duty paid on goods exempted under a separate notification could be included in computing the aggregate value of clearances for availing exemption under Notification No. 175/86-CE, and whether non-claim of refund of such duty defeated the assessee's entitlement to the exemption.

Analysis: The exemption under Notification No. 175/86-CE applied to specified clearances up to the prescribed monetary limits, and its computation mechanism excluded goods exempted by another notification from the aggregate value of clearances. Goods falling under Notification No. 111/88-CE were wholly exempt from duty; payment of duty on such exempt goods by mistake did not change their exempt character. The absence of a refund claim for the mistakenly paid duty also did not convert exempt clearances into dutiable clearances for the purpose of computing the limit under Notification No. 175/86-CE. An exemption notification must be construed so that, once the goods fall within it, the exemption is given full effect.

Conclusion: The excess duty paid on goods exempt under Notification No. 111/88-CE could not be included in the aggregate value of clearances under Notification No. 175/86-CE, and the assessee was entitled to the benefit of the exemption.

Final Conclusion: The exemption benefit was directed to be granted to the assessee on a correct computation of clearances, ignoring the duty mistakenly paid on otherwise exempt goods.

Ratio Decidendi: Goods exempted under one notification remain exempt for computing eligibility under another exemption scheme, and mistaken payment of duty does not alter their exempt status or enlarge the taxable clearance value.

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