Substantive exemption prevails over Chapter X procedural lapse when eligible goods are received and used for manufacture.

Exemption under Notifications 3/2007 and 6/2002 cannot be denied merely because Chapter X procedure was not followed where the goods were otherwise eligible, cleared to the recipient unit, and used in manufacture. Chapter X formalities are intended to verify receipt and end use of the goods; when that object is otherwise established, failure to comply is only a technical lapse and does not defeat substantive exemption. The Tribunal relied on earlier decisions holding that an otherwise admissible notification benefit cannot be refused solely for non-observance of procedural requirements. The exemption was therefore allowable.

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Issues: Whether exemption under Notification Nos. 3/2007 and 6/2002 could be denied merely because Chapter X procedure was not followed, when the goods were otherwise eligible for exemption and had been cleared to the recipient unit for use in manufacture.

Analysis: The entitlement to the notifications was not disputed if the procedural requirements were satisfied, and it was also undisputed that the goods were cleared to the other unit and used in manufacture. Chapter X procedure is intended to verify receipt of the goods and their use for the notified purpose. Where that object is otherwise established, non-compliance with the procedure is only a technical lapse and cannot defeat the substantive exemption. The Tribunal found support in earlier decisions holding that an otherwise admissible notification benefit cannot be denied solely for failure to follow Chapter X formalities.

Conclusion: Denial of the notification benefit on the ground of non-following of Chapter X procedure was not justified. The assessee was entitled to the exemption.

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