Procedural compliance under exemption notification cannot defeat refund when departmental action made literal observance impossible.

Goods were classified under Item 68 of the First Schedule, and the earlier departmental approval under Item 52 did not displace the correct tariff classification. Refund under Notification No. 167/79 could not be denied for non-observance of Chapter X procedure where the department's own insistence on Item 52 assessment made literal compliance impossible. Because the goods were cleared for the intended end-use and were duly accounted for, the procedural condition was treated as directory in those facts, and the substantive refund claim was allowed.

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Issues: (i) Whether the goods were correctly classifiable under Item 68 of the First Schedule to the Central Excises and Salt Act, 1944. (ii) Whether refund could be denied for non-observance of Chapter X procedure under Notification No. 167/79 dated 19-4-1979 when compliance had become impossible because the department had required assessment under Item 52.

Issue (i): Whether the goods were correctly classifiable under Item 68 of the First Schedule to the Central Excises and Salt Act, 1944.

Analysis: The classification dispute was examined in revision and the goods were held to fall under Item 68. The department's earlier approval of classification under Item 52 did not prevail once the correct tariff entry was determined to be Item 68.

Conclusion: The goods were correctly classifiable under Item 68.

Issue (ii): Whether refund could be denied for non-observance of Chapter X procedure under Notification No. 167/79 dated 19-4-1979 when compliance had become impossible because the department had required assessment under Item 52.

Analysis: The exemption under the notification was linked to use of the goods for further manufacture and, where relevant, observance of Chapter X procedure. Since the department itself had insisted on assessment under Item 52, the assessee could not practically comply with the Chapter X requirement for claiming the notification benefit. The factual finding was that the goods were cleared for the intended end-use and were duly accounted for, so the procedural requirement was treated as directory in the circumstances and non-compliance was not allowed to defeat the claim.

Conclusion: Refund could not be denied on the ground of non-compliance with Chapter X procedure in the facts of the case.

Final Conclusion: The assessee was entitled to the refund and the departmental denial of the benefit was set aside.

Ratio Decidendi: Where the revenue's own action makes literal compliance with a notification's procedural condition impossible, and the substantive end-use requirement is otherwise satisfied, the procedural condition may be treated as dispensed with and cannot defeat exemption or refund.

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