Exemption cannot be denied on a fresh factory-ownership ground without prior notice to the assessee.

Exemption under Notification No. 30/81-C.E. could not be denied on a factory-ownership ground that was never put to the assessee. The Tribunal had rejected the Revenue's original registration objection but refused relief on a different basis, namely that the woollen fabrics were manufactured in factories not owned by the assessee. As the record showed no prior opportunity to answer that specific objection, the denial of exemption was unsustainable. If ownership of the factory was to be treated as a disqualifying condition, the Revenue first had to issue notice and proceed on that basis.

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Issues: Whether the assessee could be denied exemption under Notification No. 30/81-C.E. on the ground that the woollen fabrics were produced in factories not owned by the assessee without a prior notice to show cause on that issue.

Analysis: The exemption had been considered on the basis of the conditions in the notification issued under Rule 8(1) of the Central Excise Rules. The Tribunal had rejected the Revenue's original objection on registration, but denied relief on a different ground, namely absence of ownership of the factory. The record showed that the assessees had not been required at any stage to meet that specific objection. A denial of exemption on a ground never put to the assessees could not stand, and if the Revenue intended to rely on factory ownership as a disqualifying condition, it was required to issue a notice and proceed from that stage.

Conclusion: The denial of exemption on the factory-ownership ground was unsustainable and the issue was decided in favour of the assessee.

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