Exemption under Notification No. 203/92-Cus upheld after MODVAT reversal and interest payment; new grounds beyond notice rejected.

Exemption under Notification No. 203/92-Cus could not be denied merely because MODVAT credit had been taken earlier, where the credit was later reversed and interest was paid, with proof of compliance produced. The appellate authority also could not reject the benefit on a new ground that the certificate was issued by the Superintendent rather than the Assistant Commissioner when that objection was absent from the show cause notice and adjudication order. Once the credit reversal and interest payment satisfied the condition, the exemption remained available. The demand, interest, and penalty were therefore unsustainable.

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Issues: Whether exemption under Notification No. 203/92-Cus could be denied on the ground that MODVAT credit had been availed earlier, despite its subsequent reversal along with payment of interest.

Analysis: The demand had been confirmed solely on the footing that MODVAT credit was initially taken. The record showed that the credit was later reversed, interest was paid, and proof of such compliance was produced. The appellate authority nevertheless denied the benefit on a new ground, namely that the certificate produced was issued by the Superintendent and not by the Assistant Commissioner, although no such allegation formed part of the show cause notice or the original adjudication order. The condition in question stood satisfied once the credit was reversed and interest was paid, and the exemption could not be denied on a ground beyond the notice and adjudication.

Conclusion: The denial of exemption was unsustainable. The demand, interest, and penalty could not be maintained, and the appeal succeeded in favour of the assessee.

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