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Issues: Whether the appellants were entitled to the benefit of exemption under Notification No. 121/94-C.E. for intermediate goods captively consumed in the manufacture of final products on the footing of intended use and substantial compliance with Chapter X procedure under the Central Excise Rules, 1944.
Analysis: The benefit of an exemption notification must be strictly established by the claimant, and the conditions attached to the exemption must be complied with according to their nature. The requirements under Chapter X, including registration, declarations, bonds and issuance of CT-2 certificate, were treated as going to the substance and essence of the scheme for duty-free removal of goods. The doctrine of substantial compliance cannot be invoked where the mandatory prerequisites that effectuate the object of the exemption have not been satisfied.
Conclusion: The appellants were not entitled to the exemption, as the essential conditions of the notification and Chapter X procedure were not complied with. The denial of the benefit and the consequent demand were upheld.
Ratio Decidendi: An exemption from excise duty cannot be claimed unless the assessee strictly satisfies the essential conditions prescribed by the notification and the statutory procedure that constitutes the substance of the exemption scheme; substantial compliance is unavailable where mandatory prerequisites remain unfulfilled.
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