Exemption for hydel gate manufacture cannot be denied by relying on an inapplicable import condition or unnotified registration requirement.

Exemption for domestically manufactured hydel gates and parts was available under Notification No. 6/2006-CE read with Notification No. 21/2002-Cus because the condition relied on by the lower authority had been deleted during the relevant period, and the remaining condition applied only to imports by a Central Public Sector Undertaking, not to factory manufacture. Denial based on non-registration under project import regulations was also unsustainable because that requirement was not raised in the show cause notice and was not a condition for the appellant's manufactured goods. On that basis, the demand and penalty were not sustainable.

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Issues: (i) Whether the appellant was entitled to the exemption under Notification No. 6/2006-CE read with Notification No. 21/2002-Cus for manufacture and clearance of hydel gates and parts thereof. (ii) Whether denial of exemption on the ground of non-registration under project import regulations was sustainable.

Issue (i): Whether the appellant was entitled to the exemption under Notification No. 6/2006-CE read with Notification No. 21/2002-Cus for manufacture and clearance of hydel gates and parts thereof.

Analysis: The exemption was claimed for goods manufactured and cleared during the relevant period under the cited notifications. The condition relied upon by the lower authority from Sl. No. 86(a) did not exist during the material period, having been deleted by Notification No. 49/2006 dated 26.05.2006. The condition in Sl. No. 86(b) applied to import of goods by a Central Public Sector Undertaking and not to domestic manufacture of excisable goods in the factory.

Conclusion: The appellant was entitled to the exemption and the contrary denial was unsustainable.

Issue (ii): Whether denial of exemption on the ground of non-registration under project import regulations was sustainable.

Analysis: The alleged absence of project import registration was not proposed in the show cause notice. In addition, the exemption under the notification did not require such registration for the goods manufactured by the appellant, and the cited Tribunal view supported that position.

Conclusion: Denial of exemption on this ground was unsustainable.

Final Conclusion: The demand and penalty could not be sustained, and the appeal succeeded with the impugned order set aside.

Ratio Decidendi: An exemption under a notification cannot be denied on the basis of a condition that was not operative during the relevant period or on a requirement applicable only to imports, and relief cannot be refused on a ground not raised in the show cause notice.

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