Mandatory certificate requirement defeats exemption claim, while penalty may be moderated on equitable considerations.

The exemption under Notification No. 6/2006-CE depended on production of the prescribed certificate from the Project Implementing Authority. As the certificate was not produced before the adjudicating authority or the Tribunal, the condition precedent for exemption remained unfulfilled, so the duty demand and consequential interest were upheld. The penalty was, however, treated as excessive in view of the appellant's disclosure of its claim and prior payment, and was reduced on equitable considerations, granting partial relief.

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Issues: (i) Whether the appellant was entitled to claim exemption under Notification No. 6/2006-CE in the absence of the certificate required by the notification; (ii) Whether the penalty imposed was liable to be sustained in full.

Issue (i): Whether the appellant was entitled to claim exemption under Notification No. 6/2006-CE in the absence of the certificate required by the notification.

Analysis: The benefit of the notification was subject to production of the prescribed certificate from the Project Implementing Authority. The appellant had undertaken to produce it but failed to do so before the adjudicating authority and before the Tribunal. In the absence of the mandatory certificate, the condition precedent for availing the exemption remained unfulfilled.

Conclusion: The demand of duty and the consequential interest were correctly confirmed and were upheld.

Issue (ii): Whether the penalty imposed was liable to be sustained in full.

Analysis: Although the exemption conditions were not met, the appellant had disclosed its intention to claim the notification benefit and had already paid the duty and penalty. In the circumstances, the penalty was considered excessive and required moderation to meet the ends of justice.

Conclusion: The penalty was reduced to Rs. 1,00,000.

Final Conclusion: The exemption claim failed for want of the mandatory certificate, but the penalty was scaled down on equitable considerations, resulting in partial relief to the appellant.

Ratio Decidendi: Where exemption under a notification is conditioned on production of a prescribed certificate, non-production of that certificate disentitles the assessee to the exemption and sustains the duty and interest demand, though penalty may be reduced on equitable considerations.

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