Chapter X compliance entitled the assessee to exemption from the application date despite delayed departmental permission.

Exemption under Notification No. 118/75 was available where the assessee had filed the prescribed application, disclosed the intended use, and complied with Chapter X procedural requirements, even though formal permission or licence was granted later. The delay in approval was attributable to the department, and there was no finding of breach of substantive safeguards, maintenance of accounts, or other excise formalities. On those facts, the permission was treated as relating back to the date of application, especially since the goods were used in another factory already under excise control and no revenue risk was shown. The demand was therefore not sustainable.

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Issues: Whether the assessee could avail the exemption under Notification No. 118/75, as amended, before formal permission or licence was granted, on having filed the application and complied with Chapter X procedure.

Analysis: The exemption was subject to observance of Chapter X of the Central Excise Rules, 1944. The assessee had applied in the prescribed manner, disclosed the intended use, and complied with the other procedural requirements such as maintenance of accounts and records. The delay in grant of permission was attributable to the department, and there was no finding of non-compliance with any substantive safeguard or excise formality. On the facts, the requirement of permission was treated as relating back to the date of application, particularly where the goods were used in another factory already under excise control and no risk to revenue was shown.

Conclusion: The assessee was entitled to the benefit of the notification from the date of application, and the demand was not sustainable.

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