Strict construction of exemption notifications requires a factual finding on actual use of goods in manufacture before reversal.

Exemption under an entry tax notification for goods used as raw materials, component parts or inputs in manufacture must be strictly proved by the assessee, and a revisional authority cannot reverse an appellate exemption finding without a reasoned factual determination on actual consumption or use of the goods in manufacture. Where the essential question is whether cutting tools were so used in producing textile machinery and auto parts, the absence of such a finding leaves the exemption entitlement unresolved. The revisional order was set aside and the matter remitted for fresh decision after hearing the parties.

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Issues: Whether the revisional authority could set aside the appellate order denying exemption under the entry tax notification without recording a factual finding on whether the cutting tools were consumed or used as raw materials, component parts or inputs in the manufacture of the finished products.

Analysis: The exemption notification covered goods brought into a local area for consumption or use as raw materials, component parts and inputs in the manufacture of an intermediate or finished product. Exemption notifications are to be strictly construed and the burden lies on the assessee to establish that the goods fall within the exemption. The appellate authority had accepted the assessee's case on the basis of samples and held that certain cutting tools were consumed as inputs in the manufacturing process. The revisional authority, however, reversed that view without recording any finding on the factual question whether the goods were in fact so consumed or used in the manufacture of textile machinery and auto parts. In the absence of such a finding, the correctness of the exemption claim could not be finally adjudicated.

Conclusion: The revisional order was set aside and the matter was remitted for fresh decision after hearing the parties.

Ratio Decidendi: A revisional order affecting exemption entitlement cannot be sustained where it reverses the lower authority without a reasoned factual finding on the essential applicability of the exemption notification.

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