Aggregate first-clearance exemption under Notification 175/86-C.E. applies across tariff headings, subject to each heading limit.

Notification No. 175/86-C.E. was construed as an integrated exemption scheme for first clearances in a financial year: a manufacturer with goods falling under more than one tariff heading could claim exemption up to the aggregate first-clearance limit of Rs. 30 lakhs, provided clearances under any single heading did not exceed Rs. 15 lakhs. The interpretation allowed different headings to be combined within the overall ceiling, and excess clearances under one heading did not make clearances under other eligible headings dutiable before the aggregate limit was exhausted. On the stated facts, the exemption remained available and the duty demand and penalty were unsustainable.

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Issues: Whether, under Notification No. 175/86-C.E., a manufacturer having more than one tariff heading can avail full exemption up to the aggregate value of first clearances of Rs. 30 lakhs, subject only to the condition that clearances under any one heading do not exceed Rs. 15 lakhs.

Analysis: The notification was read as an integrated scheme governing first clearances in a financial year. Its clause granting exemption up to Rs. 30 lakhs, read with the proviso limiting clearances under any one heading to Rs. 15 lakhs, was held to permit any combination of clearances across different headings so long as the overall ceiling of Rs. 30 lakhs was not crossed and the ceiling of Rs. 15 lakhs for any single heading was respected. The reasoning accepted the departmental clarification that excess clearances under one heading do not make the other eligible goods dutiable before the aggregate first-clearance limit is exhausted.

Conclusion: The exemption was available to the assessee on the facts, and duty could not be demanded on the other clearances merely because one heading had crossed Rs. 15 lakhs. The levy and penalty were unsustainable.

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