Conditional exemption strict construction: goods destroyed by natural disaster do not qualify as rejected goods for duty relief.

Notification No.22/2003-CE permits conditional destruction of specified goods subject to compliance with its clauses (including presence of a Central Excise officer) and must be strictly construed; it contains no provision equating destruction by natural disaster with destruction as a rejected good. Accordingly, goods brought into EOU/bonded premises without duty and subsequently destroyed in floods do not fall within the notification's permitted categories and cannot be treated as rejected goods to avoid duty; reliance on remission under separate rules is inapplicable and the departmental demand stands.

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Issues: (i) Whether goods brought into an EOU/bonded premises without payment of duty under Notification No.22/2003-CE dated 31.03.2003 which were destroyed in floods (natural disaster) can be treated as rejected goods and thereby treated as having been destroyed within the factory so as to avoid payment of duty.

Analysis: The Court examined Notification No.22/2003-CE dated 31.03.2003 and its specific clauses (including Clause 3(iii) and Condition (4)) which permit destruction of certain categories of goods (subject to presence of Central Excise officer) and found the notification to be conditional. The Court applied the principle that such conditional exemptions must be strictly construed. The factual finding that the goods were destroyed by floods means they were not used in manufacture or packaging for export. The Court observed there is no provision in the notification that treats goods destroyed by natural disaster as equivalent to rejected goods or permits remission of duty in such circumstances. The Court further noted that the case law relied on by the appellant related to remission under Rule 21 of the Central Excise Rules, which is inapplicable to the interpretation of the notification before the Tribunal.

Conclusion: The destroyed goods due to floods do not fall within the categories covered by Notification No.22/2003-CE dated 31.03.2003 and cannot be treated as rejected goods for the purpose of avoiding duty; the departmental demand is tenable and the impugned orders are upheld; appeal dismissed.

Ratio Decidendi: A conditional exemption notification must be strictly construed and, absent an express provision treating destruction by natural disaster as equivalent to destruction as a rejected good under the notification, goods destroyed by floods do not attract the benefits of Notification No.22/2003-CE dated 31.03.2003.

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