Strict compliance with fiscal exemption conditions required; late interest deposit defeated amnesty benefit under customs notification.

Fiscal exemption and amnesty benefits under Notification No. 203/92 depended on strict compliance with prescribed conditions. A prior reversal of Modvat credit made before the scheme began was not, by itself, disqualifying, but the benefit was unavailable because interest was not deposited within the stipulated time and no relaxation or extension was permitted. A further plea that inputs used in exempted exports could not be segregated was rejected because it was not raised before the lower authorities and could not be introduced at the appellate stage to defeat the notification conditions. The duty demand was therefore sustained.

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Issues: (i) Whether prior reversal of Modvat credit before the commencement of the Amnesty Scheme entitled the importer to the benefit of the scheme and exemption under Notification No. 203/92; (ii) whether the appellant could rely on the alleged inability to segregate inputs used for exempted exports to avoid liability under the notification.

Issue (i): Whether prior reversal of Modvat credit before the commencement of the Amnesty Scheme entitled the importer to the benefit of the scheme and exemption under Notification No. 203/92.

Analysis: The scheme recognised reversals already made before its commencement, so a reversal made earlier in 1994 could not be rejected merely because it preceded the scheme. However, the scheme required deposit of interest by the stipulated date, and there was no provision permitting relaxation or extension of time. Exemption notifications and amnesty schemes in fiscal matters must be strictly construed, and compliance with the prescribed conditions is mandatory.

Conclusion: The prior reversal by itself did not defeat the claim, but the benefit of the scheme was unavailable because the interest was not deposited within the time prescribed.

Issue (ii): Whether the appellant could rely on the alleged inability to segregate inputs used for exempted exports to avoid liability under the notification.

Analysis: The plea that segregation of inputs was not reasonably possible was not raised before the authorities below. In any event, the rule on crediting and debiting inputs in exempted products requires a factual foundation and compliance with the relevant conditions before removal of the exempted goods. A new factual plea cannot be permitted at the appellate stage to bypass the conditions of the exemption.

Conclusion: The appellant could not rely on the segregation argument to avoid the duty demand.

Final Conclusion: The exemption conditions were not duly fulfilled, and the demand of customs duty was sustained while the appeal failed.

Ratio Decidendi: Fiscal exemption and amnesty provisions must be strictly complied with, and benefit under such schemes is lost when a mandatory condition, such as deposit of interest within the prescribed time, is not satisfied.

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