Project-based excise exemption upheld where World Bank financing and prescribed certificates supported clearance, with no suppression found.

Exemption under Notification No. 108/95-C.E. was available where goods were supplied to a Government-approved project financed by an international organisation, and the prescribed certificates had been produced at clearance; the notification did not require foreign financing to cover the entire project cost from the outset, so clearances made before World Bank financing commenced did not lose the benefit. The Tribunal also found no misrepresentation or suppression with intent to evade duty, and held that the duty paid on raw materials could not be ignored in assessing liability. The demand for differential excise duty, interest and penalty was set aside, and the exemption was allowed.

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Issues: Whether exemption under Notification No. 108/95-C.E. was available to clearances made before the date from which World Bank financing commenced for the project, and whether the demand, interest and penalty could be sustained.

Analysis: The notification required that the goods be supplied to a project approved by the Government of India and financed by an international organisation, and the required certificates had been produced at the time of clearance. The absence of financing for the entire project cost did not defeat the exemption, because the notification did not impose such a condition. The project was treated as a World Bank financed project, and the fact that expenditure up to a particular date was met by the beneficiary did not justify denial of the benefit. The Tribunal also found no misrepresentation or suppression with intent to evade duty, and the duty paid on raw materials could not be ignored while examining the liability.

Conclusion: The exemption was held admissible, and the demand of differential excise duty, interest and penalty was set aside in favour of the assessee.

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