Rural area exemption under excise notification cannot be denied by extending cantonment exclusion beyond plain wording.

A unit located at village Derathu was treated as falling within a rural area for exemption under Notification No. 8/2003-CE because the notification excluded only units situated within a municipal committee, municipal corporation, town area committee, cantonment board or notified area committee. The accepted factual position was that the village lay beyond the cantonment periphery, and the clear language of Rule 5(H) did not permit any additional peripheral area to be read into the exclusion. On that plain-text construction, the exemption was available, and the demand and penalties were not sustainable.

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Issues: Whether the respondent-manufacturer's unit at village Derathu fell within the cantonment area so as to deny exemption under Notification No. 8/2003-CE dated 01.03.2003.

Analysis: The relevant notification required the unit to be located in a rural area, and excluded only areas falling within a municipal committee, municipal corporation, town area committee, cantonment board or notified area committee. The factual position accepted by the parties was that village Derathu lay beyond the periphery of the cantonment area. The text of Rule 5(H) was treated as clear and unambiguous, and it was held that no additional peripheral area could be read into the exclusion clause. The exemption could not be denied by expanding the scope of the notification beyond its plain language.

Conclusion: The unit was held to fall within the definition of rural area and the exemption was applicable; the demand and penalties were not sustainable.

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