Exemption notification as a claimed benefit allowed assessee to pay duty on exempt goods and claim Modvat credit.

An exemption notification was treated as a statutory benefit attached to the tariff scheme, not as extinguishing the underlying levy. Because the tariff duty continued to exist and the exemption had to be claimed, the assessee retained a choice whether to avail the exemption. On that basis, duty paid on goods covered by the exemption could not be disregarded merely because the notification existed, and Modvat credit on such duty could not be refused on the ground that the goods were exempt. The assessee was therefore entitled to forgo the exemption, pay duty, and claim consequential credit.

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Issues: Whether a manufacturer, in respect of goods exempted by notification, may elect not to avail the exemption and instead pay duty so as to take Modvat credit on the duty paid.

Analysis: The exemption notification was treated as part of the statutory scheme, but not as extinguishing the tariff levy itself. The duty rate prescribed in the tariff remained in existence, while the exemption operated as a benefit conferred on the assessee. Since the exemption is in the nature of a benefit and must be claimed, and since conditional exemptions may not always be capable of being fulfilled, the assessee retains an element of choice whether to avail of the exemption. On that basis, payment of duty on exempt goods cannot be denied merely because an exemption notification exists, and credit on the duty so paid cannot be rejected on the ground that duty ought not to have been paid.

Conclusion: The assessee was entitled to opt not to avail the exemption notification, pay duty, and take Modvat credit on such duty.

Ratio Decidendi: An exemption notification confers a statutory benefit that must be claimed, and where the tariff levy continues to exist, the assessee may choose not to avail the exemption and pay duty to claim consequential credit.

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