Strict construction of exemption notifications requires full compliance with duty-payment conditions, including additional customs duty where applicable.

An exemption from excise duty for scrap arising in the Kandla Free Trade Zone was available only when the scrap was cleared for home consumption outside the zone on payment of duties of customs leviable under law. The text explains that this expression includes not only basic customs duty but also the additional duty under section 3(1) of the Customs Tariff Act, 1975. Because that additional duty had not been paid, the condition attached to the exemption was not fulfilled. It also states that exemption notifications must be strictly construed and that the assessee bears the burden of proving compliance with all conditions.

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Issues: Whether the respondent was entitled to exemption from excise duty under Notification No. 16/83-C.E. despite not paying additional duty leviable under section 3(1) of the Customs Tariff Act, 1975, when clearing scrap for home consumption outside the Kandla Free Trade Zone.

Analysis: The exemption notification granted relief from the whole of the duty of excise on scrap or waste arising in the Kandla Free Trade Zone, but only if the scrap was cleared for home consumption outside the zone on payment of duties of customs leviable under any law for the time being in force. The Court held that the expression covered not merely basic customs duty under the Customs Act, 1962, but also the additional duty leviable under section 3(1) of the Customs Tariff Act, 1975. Since the respondent had not paid that additional duty, the condition attached to the exemption was not satisfied. The notification was held to be one that had to be strictly construed, and the assessee bore the burden of proving fulfillment of its conditions.

Conclusion: The respondent was not entitled to the exemption under Notification No. 16/83-C.E., and the demand for additional duty was sustainable against the assessee.

Ratio Decidendi: An exemption notification must be strictly construed, and where exemption is conditional, the prescribed condition must be fully satisfied before the benefit can be claimed; payment of customs duties under such a notification includes the additional duty leviable under section 3(1) of the Customs Tariff Act, 1975 where the notification so requires.

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