Capital goods credit restriction cannot be extended to export clearances; rebate claim remains maintainable.

A restriction in an exemption notification on use of capital goods credit applies only to the clearances expressly covered by that exemption. The Gujarat High Court held that Notification No. 8/2001 was confined to home-consumption clearances and could not be extended to export clearances. Clause (iv) of para 2, read with the preceding condition, therefore did not bar utilisation of capital goods credit for duty paid on exports. On that basis, the rebate claim remained maintainable, the rejection orders were unsustainable, and rebate with statutory interest was directed to be granted.

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Issues: Whether Notification No. 8/2001 applied to export clearances and whether clause (iv) of para 2 barred use of capital goods credit for payment of duty on exports so as to deny rebate.

Analysis: The notification granted exemption only to clearances for home consumption. Clause (iv) of para 2, read with the immediately preceding condition, restricted utilisation of capital goods credit only in relation to the clearances covered by the exemption, namely home-consumption clearances within the specified turnover limit. The words "on the aforesaid clearances" were and could not be ignored. Export clearances were outside the exemption scheme, and the restriction in clause (iv) could not be extended to duty paid on exports. The rebate claim was not defeated by the use of capital goods credit for payment of duty on export goods.

Conclusion: The rebate claim was maintainable and the orders rejecting it were unsustainable.

Final Conclusion: The impugned orders were quashed and rebate with statutory interest was directed to be granted to the petitioner.

Ratio Decidendi: A restriction in an exemption notification on utilisation of capital goods credit applies only to the clearances specifically covered by that exemption and cannot be extended to export clearances unless the notification expressly so provides.

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