Conditional exemption on a sale does not make the goods exempted, so input tax credit remains available.

A conditional exemption granted to a manufacturer or to a particular sale does not convert the underlying goods into exempted goods for input tax credit purposes. The SC distinguished goods exempt from tax under the Act from exemptions operating only on a specified person, class of persons, or transaction. Because asbestos cement sheets remained taxable goods and only the manufacturer's sale was exempt under the notification conditions, the denial of input tax credit on raw materials under Section 18(1)(e) was unsustainable. The assessee was therefore entitled to input tax credit, and the revenue's position failed.

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Issues: Whether asbestos cement sheets were exempted goods so as to disentitle the assessee to input tax credit on raw materials used in their manufacture.

Analysis: The statutory scheme distinguished between exempted goods and exemption granted to a person or to a specified transaction. Exempted goods are goods exempted from tax in accordance with the Act, whereas exemptions under the notification framework could operate on the sale or purchase by a specified class of persons or subject to conditions. The notifications relied on by the revenue did not show that asbestos cement sheets ceased to be taxable goods; they showed that the manufacturer's sale was exempt under the notified conditions. Where goods remain taxable goods, a transaction-specific or person-specific exemption does not convert them into exempted goods for the purpose of denying input tax credit under Section 18(1)(e).

Conclusion: The assessee was entitled to input tax credit and the denial of credit was unsustainable.

Final Conclusion: The appeals failed because the exemption related to the manufacturer's sale and not to the goods themselves, so the goods did not fall within the category of exempted goods for denial of input tax credit.

Ratio Decidendi: A conditional exemption granted to a person or to a particular sale does not make the underlying goods exempted goods for the purpose of denying input tax credit; only goods exempted as such fall outside the credit entitlement under the Act.

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