Customs exemption for printing machines depends on the correct output test, not an erroneous capacity-based interpretation.

An exemption under a customs notification had to be tested by the correct output criterion, not by an inconsistent capacity-based assumption. The authorities denied relief on the footing that the imported printing machines could produce only 25,000 copies per hour, while the appellate view treated actual output as the relevant test for a notification requiring 30,000 or more copies per hour. Because the show cause proceedings themselves proceeded on an erroneous interpretation of the notification, the denial of exemption could not be sustained. The assessee was therefore entitled to the exemption and related relief.

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Issues: Whether exemption under the customs notification depended on the actual output of the imported printing machines in operation or on their designed/rated capacity.

Analysis: The notification granted exemption to specified printing machinery having 30,000 or more copies per hour. The customs authorities proceeded on the footing that the machines were capable of only 25,000 copies per hour and rejected the benefit on that basis. The appellate authority, however, treated actual output as the governing test and not mere designed capacity. The record also showed that the departmental stand had shifted between capacity and actual performance. In that situation, the show cause proceedings were founded on an incorrect interpretation of the notification.

Conclusion: The exemption could not be denied on a capacity-based approach when the proceedings themselves proceeded on that erroneous premise; the appeal succeeded and the assessee was entitled to relief.

Ratio Decidendi: Where an exemption notification turns on output criteria, the authority must apply the correct legal test consistently, and proceedings founded on an erroneous capacity-based interpretation cannot be sustained.

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