Conditional exemption and deemed MODVAT credit upheld where Revenue failed to prove inputs were non-duty paid.

Conditional exemption notifications for aluminium alloy ingots applied only where the goods were manufactured from duty-paid inputs of the specified chapters. The supplier was cross-examined and stated that no exemption had been availed during the relevant period, while the alleged letters relied on by the Revenue were not available on record. In the absence of corroborative material to show that the inputs were non-duty paid, the Revenue's basis for denying the benefit was unsustainable. The assessee was therefore held entitled to the exemption and deemed MODVAT credit, and the denial was set aside.

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Issues: Entitlement to deemed MODVAT credit and exemption on aluminium alloy ingots under the relevant notifications, where the supplier stated that no exemption had been claimed and the Revenue produced no reliable material to show that the inputs were non-duty paid.

Analysis: The exemption notifications were conditional and applied only if the goods were manufactured from duty-paid inputs falling within the specified chapters. The assessee cross-examined the supplier, who categorically stated that no exemption had been availed during the relevant period. The alleged letters relied on by the authorities to deny the benefit were not available in the record. In the absence of corroborative material from the Revenue, the supplier's statement could not be discarded, and the foundation for denying the benefit was held to be unsustainable.

Conclusion: The assessee was entitled to the benefit of the exemption and deemed credit, and the denial of such benefit was set aside.

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