Substantive exemption prevails over procedural correlation gaps in Navy supply refunds where actual delivery is undisputed.

Exemption under Notification No. 64/95-CX for supply of stores, including fuel, to the Indian Navy was held not to be denied merely because the appellant could not perfectly correlate the duty-paid goods purchased from the manufacturer with the supplies made to the Navy. The factual supply to the Navy for consumption on board its vessels was not disputed, and the Tribunal treated the missing direct invoice correlation as a procedural lapse rather than a substantive defect. It further held that the circular insisting on precise correlation could not override the substantive exemption on these facts, so the refusal of refund was unsustainable and the appeal was allowed.

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Issues: Whether refund of duty and exemption under Notification No. 64/95-CX dated 16.03.1995 could be denied merely because the appellant could not fully correlate the duty-paid goods procured from the manufacturer with the supplies made to the Indian Navy.

Analysis: The benefit of the notification extended to supply of stores, including fuel, to the Indian Navy for consumption on board its vessels, and the factual position that such supplies were made was not in dispute. The only objection was the inability to produce perfect correlation between the manufacturer's invoice and the appellant's supply. The Tribunal distinguished the earlier decision relied on by the revenue and followed its own earlier decision in the appellant's case, holding that where the goods were directly supplied to the Navy and the exemption was otherwise applicable, the absence of direct manufacturer-to-Navy supply was only a procedural omission. The circular requiring precise correlation did not justify denial of the substantive exemption on the facts of the case.

Conclusion: The denial of refund was unsustainable and the appeal was allowed.

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