Broad construction of input duty exemption supports cash refund despite procedural lapses when duty-paid inputs are verified.

Notification No. 178/77, as amended, was read as granting exemption to finished excisable goods to the extent duty had already been paid on inputs, and the later trade notices could not narrow that substantive benefit. Procedural non-compliance or delay in following the prescribed refund procedure did not defeat the exemption where duty-paid inputs were in fact used in manufacture and the department was satisfied on that basis. The exemption was construed broadly in favour of enlargement rather than restriction, and the assessee was entitled to cash refund in lieu of set-off, subject to verification of the claims and limitation by the adjudicating authority.

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Issues: Whether, under Notification No. 178/77 as amended by Notification No. 295/77, the assessee was entitled to claim cash refund of duty paid on inputs used in the manufacture of finished excisable goods, despite non-compliance with the procedural requirements initially prescribed by the department.

Analysis: The notification granted exemption to finished goods to the extent of duty already paid on the inputs and did not, at the outset, prescribe any procedure. The later trade notices could not curtail the substantive scope of the exemption. Procedural lapses or delay in compliance could not defeat the benefit where the department was satisfied that duty-paid inputs were actually used in the manufacture of the final products. The principle that an exemption provision capable of more than one construction should be interpreted to enlarge, and not restrict, the exemption supported the assessee's claim. The authorities also accepted the practical difficulty of the prescribed procedure and permitted modified compliance from a later date.

Conclusion: The assessee was entitled to claim cash refund in place of set-off, subject to verification of the refund claims and limitation by the adjudicating authority.

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