Delegated exemption conditions cannot change the statutory meaning of manufacturer or alter excise levy incidence.

Rule 8(1) permitted exemption from excise duty on terms and conditions, but it could not be used to alter the statutory incidence of levy under the Central Excises and Salt Act, 1944. The Explanation to Notification No. 88/77-C.E., which deemed the actual manufacturer to be a non-manufacturer and treated the buyer or brand owner as the manufacturer for footwear exemption, was beyond delegated power because it reversed the Act's basic scheme. The Explanation was therefore invalid, and the assessment order and demand notice founded solely on it could not stand.

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Issues: Whether the Explanation appended to Notification No. 88/77-C.E. dated 9-5-1977, which deemed a manufacturer to be a non-manufacturer and a non-manufacturer to be a manufacturer for the purpose of footwear exemption, was valid under Rule 8(1) of the Central Excise Rules, 1944 and the Central Excises and Salt Act, 1944, and whether the assessment order and demand notice founded on that Explanation could stand.

Analysis: Rule 8(1) empowers the Government to grant exemptions from excise duty on such terms and conditions as it may impose, but that power must operate within the framework of the charging Act and the Rules. Excise duty is levied on manufactured goods and on the manufacturer, and the impugned Explanation directly reversed that statutory scheme by creating a fiction that treated the actual manufacturer as a non-manufacturer and the buyer or brand owner as the manufacturer. Such a fiction did not merely regulate the manner of exemption; it altered the basic incidence of levy and was therefore beyond the scope of the delegated power. The Explanation was consequently inconsistent with the Act and the Rules, and the assessment and demand made solely on its basis could not survive.

Conclusion: The Explanation appended to Notification No. 88/77-C.E. dated 9-5-1977 was invalid and was struck down, and the assessment order and consequential demand notice were quashed, in favour of the assessee.

Ratio Decidendi: A delegated exemption notification under Rule 8(1) cannot, under the guise of prescribing conditions, create a legal fiction that alters the statutory concept of manufacturer and thereby changes the incidence of excise levy.

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