Strict construction of exemption notifications bars indirect supply claims where direct delivery to the Navy is required.

Exemption under Notification No. 64/95-C.E. was confined to excisable goods supplied directly as stores for consumption on board a vessel of the Indian Navy or Coastguard. Goods supplied instead to shipbuilder companies acting as intermediaries did not satisfy the direct-supply condition, even if accompanied by naval certificates stating intended naval use. A certificate of proposed use could not replace the express statutory requirement of supply to the specified recipient. The exemption was therefore unavailable, and the related demand, interest, and penalty were upheld.

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Issues: Whether exemption under Notification No. 64/95-C.E. dated 16-3-1995 was available where excisable goods were supplied to shipbuilder companies acting as agents of the Indian Navy, instead of being supplied directly to the Indian Navy as stores for consumption on board a vessel.

Analysis: The notification granted exemption only to goods supplied as stores for consumption on board a vessel of the Indian Navy or Coastguard. The wording of the exemption was treated as clear and unambiguous. Since the goods were supplied to shipbuilders on their purchase orders, even though accompanied by certificates from naval officers, the condition of direct supply to the Indian Navy was not satisfied. A certificate stating that the goods would be used for naval purposes did not substitute for the statutory requirement of direct supply to the Navy.

Conclusion: The exemption was not admissible. The demand, interest, and penalty were sustained, and the appeal failed.

Ratio Decidendi: An exemption notification must be construed strictly, and where the notification requires direct supply to a specified recipient for a specified use, compliance with that condition cannot be replaced by supply through an intermediary or by a certificate of intended use.

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