Conditional exemption claims and Modvat credit cannot be denied without factual verification of eligibility and utilisation.

A conditional exemption under Notification No. 10/96 may be claimed at the appellate stage if the assessee is otherwise eligible, but its availability depends on verification of the prescribed conditions from the record. The claim cannot be rejected merely because it was raised late. Modvat credit also cannot be denied on a bare assertion of non-utilisation; the revenue must establish utilisation or other factual grounds for disallowance. Both the exemption claim and the credit claim therefore required fresh factual adjudication before any final denial.

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Issues: (i) Whether the assessee could claim the benefit of Notification No. 10/96 at the appellate stage and whether the conditions of the notification required factual verification; (ii) Whether Modvat credit was inadmissible merely because the department had not shown non-utilisation during the exemption period.

Issue (i): Whether the assessee could claim the benefit of Notification No. 10/96 at the appellate stage and whether the conditions of the notification required factual verification

Analysis: The benefit of a notification is not barred merely because it was not claimed at the initial stage. A later claim is permissible where the assessee is otherwise eligible. However, where the notification is conditional, the authority must verify whether the stipulated conditions are satisfied on the basis of records and evidence. In the present case, there was no finding on whether the conditions attached to the notification were met.

Conclusion: The claim under Notification No. 10/96 could not be rejected only on the ground of late assertion and the matter had to be examined afresh for verification of the conditions.

Issue (ii): Whether Modvat credit was inadmissible merely because the department had not shown non-utilisation during the exemption period

Analysis: Denial of credit on the bare assertion that there was no evidence of non-utilisation was insufficient. The burden to establish utilisation lay on the revenue, and the question whether the credit was in fact utilised during the period of exemption required factual verification.

Conclusion: The Modvat credit issue also required reconsideration and could not be finally denied without verification.

Final Conclusion: The matter was sent back for fresh adjudication on both the exemption claim and the Modvat credit claim after necessary factual verification.

Ratio Decidendi: A conditional exemption may be claimed at a later stage, but its availability depends on verification of the prescribed conditions; a credit benefit cannot be denied without proof of utilisation or other factual findings supporting disallowance.

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