Strict compliance for conditional excise exemption: procedural requirements were mandatory, so the exemption failed and duty demands stood.

Conditional central excise exemption was available only on strict compliance with two cumulative requirements: proof to the prescribed excise authority that the goods were used for the intended purpose, and observance of the prescribed procedure when such use was outside the factory. In the first matter, the Chapter X procedure was not satisfied because the required registration certificate had expired before the clearances. In the second, the recipient manufacturer failed to apply in the prescribed form under Rule 3(1) of the 2001 Rules. Actual intended use or substantial compliance was held insufficient. The exemption was therefore unavailable, the duty demands were sustained, and the appeals were dismissed.

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Issues: Whether exemption from central excise duty under a conditional exemption notification was available when the goods were intended for use outside the factory of production but the prescribed procedural requirements were not complied with.

Analysis: The exemption notifications in both appeals made the benefit subject to two cumulative conditions: proof to the satisfaction of the prescribed excise that the goods were used for the intended purpose, and compliance with the prescribed procedure where such use was elsewhere than in the factory of production. In the first matter, the relevant procedure under Chapter X of the Central Excise Rules, 1944 required a valid registration certificate, and the certificate had expired before the disputed clearances. In the second matter, the procedure under Rule 3(1) of the 2001 Rules required the recipient manufacturer to apply in the prescribed form, which was admittedly not done. The plea that actual intended use or technical compliance was sufficient was rejected, as the exemption conditions had to be strictly fulfilled.

Conclusion: The exemption was not available. The demands of duty were sustained and the appeals were dismissed.

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