Exemption as an assessee's option supports duty payment through credit and export rebate on exempt goods.

An exemption notification is a benefit that an assessee may choose to accept or decline. Where an assessee manufacturing fully exempt goods elects to pay duty on clearances by using Cenvat credit, that duty payment is treated as valid for credit purposes and export rebate cannot be denied solely because the final products were otherwise exempt. A contrary departmental circular cannot override the legal position reflected in the cited decisions. The note also recognises that rebate on exported goods may reflect permissible utilisation of accumulated credit under the export rebate scheme.

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Issues: Whether an assessee manufacturing fully exempted goods can forgo the exemption, pay duty on the clearances from Cenvat credit, and thereafter claim rebate on exported goods.

Analysis: The order applied the settled principle that an exemption notification is a benefit available to the assessee and cannot be forced upon it. Where the assessee elects to pay duty on exempted final products, the duty payment is treated as valid for the purpose of Cenvat credit on inputs used in manufacture. The contrary departmental circular was held not to prevail over the legal position recognised in the cited decisions. The order further noted that the rebate claim on exported goods reflected permissible utilisation of accumulated credit under the export rebate scheme.

Conclusion: The assessee was entitled to opt not to avail the exemption, to use input credit for duty payment, and to claim rebate on the exported goods.

Final Conclusion: The departmental appeals failed and the rebate sanctions were sustained.

Ratio Decidendi: An exemption notification confers a benefit that the assessee may choose to avail or forgo, and if duty is paid on exempted final products, credit on inputs and consequential export rebate cannot be denied merely because the goods were otherwise exempt.

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