Customs exemption and penalty notice requirements: non-availment of input credit must be proved, and penalty cannot rest on an uninvoked provision.

A customs exemption under Notification No. 203/92-Cus was denied because the licence declaration required proof that no input stage credit had been taken, and the appellant failed to rebut that condition or establish compliance. The Tribunal treated affirmative proof of non-availment of input credit as necessary for the exemption, so the denial was upheld. Penalty imposed under Section 114A was unsustainable because that provision had not been invoked in the show-cause notice; penalty on an unnotified ground could not stand, so it was set aside. The demand on merits remained upheld, with partial relief only on penalty.

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Issues: (i) whether the benefit of Notification No. 203/92-Cus could be denied on the ground that the exports used for obtaining the DEEC licence were subject to input stage credit, and (ii) whether penalty under Section 114A of the Customs Act was sustainable when that provision had not been invoked in the show-cause notice.

Issue (i): whether the benefit of Notification No. 203/92-Cus could be denied on the ground that the exports used for obtaining the DEEC licence were subject to input stage credit.

Analysis: The notification specifically required that no input stage credit under rule 56A or 57A of the Central Excise Rules, 1944 be obtained. The declaration made for obtaining the licence asserted compliance with the notification conditions. The appellant did not produce evidence rebutting that declaration or establishing that the condition had been satisfied. The Tribunal treated the condition as one that had to be affirmatively shown to obtain the exemption benefit.

Conclusion: The benefit of Notification No. 203/92-Cus was rightly denied, and this issue is decided against the assessee.

Issue (ii): whether penalty under Section 114A of the Customs Act was sustainable when that provision had not been invoked in the show-cause notice.

Analysis: The show-cause notice invoked Section 112(a) of the Customs Act, but not Section 114A. Since penalty was ultimately imposed under Section 114A, the absence of invocation of that provision in the notice was treated as material. The penalty could not be sustained on a provision not put to notice.

Conclusion: The penalty under Section 114A was unsustainable and is set aside, in favour of the assessee.

Final Conclusion: The demand on merits was upheld, the request for reduction of interest was rejected, and the penalty under Section 114A was annulled, resulting in a partial success for the appellant.

Ratio Decidendi: A statutory exemption conditioned upon non-availment of input credit must be supported by proof of compliance, and a penalty cannot be sustained under a provision that was not invoked in the show-cause notice.

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