Strict construction of exemption notifications gives way to liberal reading once coverage is established for scheme benefit.

Money credit under Notification No. 231/87-C.E. was considered for a unit manufacturing acetone where ethyl alcohol was produced and consumed captively in the same factory without sale price being paid for intermediate molasses or alcohol. The notification was read as applying to acetone as the final product and to indigenous ethyl alcohol used in manufacture; the price condition in clause (b)(ii) had to be read in light of the scheme's object. Exemption notifications are strictly construed at the threshold, but once coverage is established they are construed liberally to avoid defeating the intended benefit. On that basis, credit was held admissible and denial of credit unsustainable.

---

---

Issues: Whether money credit under Notification No. 231/87-C.E. was admissible to a unit manufacturing acetone where ethyl alcohol was produced and consumed captively within the same factory, despite the fact that no sale price was paid for the intermediate molasses or ethyl alcohol.

Analysis: The notification applied to acetone as a final product and to indigenous ethyl alcohol used in its manufacture. The condition in clause (b)(ii) requiring payment of the notified price had to be read in the context of the scheme's object. The governing principle was that an exemption notification is construed strictly at the stage of applicability, but once the assessee falls within its scope, it is to be given a liberal construction so as not to defeat its purpose. The departmental trade notices and the subsequent amendment to the notification showed that the intended benefit was to extend to units manufacturing molasses, alcohol, and chemicals within the same factory, provided duty on molasses had been paid at the higher rate.

Conclusion: Money credit was admissible to the assessees, and the denial of credit was unsustainable.

Final Conclusion: The appeals succeeded and the impugned order was set aside, with the assessees held entitled to the credit claimed.

Ratio Decidendi: An exemption notification must be strictly applied to determine coverage, but once the assessee is within its ambit, it should be construed liberally to advance the notified scheme and avoid defeating its object.

---