Captive clearance exclusion under exemption notification applies on its text, without requiring final goods to use the same notification.

An exemption notification excluding captive clearances of specified inputs from the aggregate value of clearances was construed according to its text, without reading in a condition that the final specified goods must also be cleared under the same notification. On that construction, captive clearances of parts, rotors and stators used in further manufacture were not to be counted for computing the exemption threshold. The notification's benefit therefore extended to the assessee, and the related duty demands and penalties were unsustainable.

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Issues: Whether, under Explanation III to Notification No. 175/86-C.E. dated 1-3-1986, the value of specified goods used captively as inputs is excluded from the aggregate value of clearances even when the final specified goods are cleared under other exemption notifications.

Analysis: The majority held that Explanation III contains no condition requiring the final specified goods to be cleared under the same notification. The notification defines specified goods by reference to the tariff description and annexure, and Explanation III directs that captive clearances of inputs used for further manufacture of specified goods are not to be counted for calculating the aggregate value of clearances. The notification was read as a whole, and the exclusion of captive inputs was given full effect without importing a limitation not expressed in the text. On that construction, the captive clearances of parts, rotors and stators were not to be included in the aggregate turnover for the purpose of the exemption.

Conclusion: The benefit of Notification No. 175/86-C.E. dated 1-3-1986 was available and the duty demands and penalties were unsustainable.

Ratio Decidendi: Where an exemption notification expressly excludes captive clearances of specified inputs from the aggregate value of clearances, that exclusion applies according to the text of the notification and cannot be restricted by reading in a further condition that the final goods must also be cleared under the same notification.

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