Exemption notifications require actual duty payment; set-off adjustment cannot substitute for payment under the excise refund claim.

Notification No. 432/86 grants exemption for the final product only to the extent of duty actually paid on the specified input used in manufacture. A set-off credit or adjustment in the register is not equivalent to actual payment of duty, so it cannot satisfy the notification's condition. As exemption notifications must be strictly construed, the benefit was unavailable where the input duty was merely adjusted rather than paid, and the claim for refund or exemption on exports therefore failed.

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Issues: Whether the petitioner was entitled to refund or exemption under Notification No. 432/86 when the duty on the input was adjusted through a set-off register instead of being actually paid, and whether such adjustment satisfied the condition in the notification.

Analysis: Notification No. 432/86, issued under Rule 8(1) of the Central Excise Rules, 1944, exempts the final product only to the extent of duty already paid on the specified input used in its manufacture. The notification contemplates actual payment of duty and does not provide for set-off adjustment as a substitute for payment. A credit or adjustment in the set-off register is not equivalent to payment of duty for the purpose of claiming the exemption or refund. The benefit under an exemption notification is available only when its conditions are strictly satisfied, and the notification did not envisage refund on exports where duty was merely adjusted through set-off.

Conclusion: The petitioner was not entitled to the claimed refund or exemption on the basis of set-off adjustment, and the claim failed.

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