Exemption set-off cannot be denied for procedural lapse when substantive notification conditions and duty-paid input use are established.

A Larger Bench was competent to hear an appeal referred on account of a difference of opinion, and a further reference to the President did not create a jurisdictional bar or an endless cycle of reconsideration. On the substantive exemption issue, set-off under Notification No. 178/77, as amended by Notification No. 295/77, was available where the assessee established duty-paid use of the relevant input in manufacture, supported by declarations, correspondence, and material composition details. The commentary treats the filing of a revised classification list as a procedural step not mandated by the notification itself, so it could not defeat the benefit when substantive conditions were met.

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Issues: (i) Whether the Larger Bench had jurisdiction to hear and decide the appeal despite the preliminary objection that it had been constituted only to resolve the difference of opinion. (ii) Whether the respondents were entitled to the benefit of set-off under Notification No. 178/77, as amended by Notification No. 295/77, despite the manner and timing of filing the input statement.

Issue (i): Whether the Larger Bench had jurisdiction to hear and decide the appeal despite the preliminary objection that it had been constituted only to resolve the difference of opinion.

Analysis: The reference procedure was invoked because the original Members differed on the outcome. A further reference back to the President to constitute a Larger Bench did not deprive the constituted Bench of power to decide the appeal. Accepting the objection would have caused an endless cycle of fresh references and judicial stalemate, which the statutory scheme did not contemplate.

Conclusion: The preliminary objection was rejected and the Larger Bench held itself competent to hear and dispose of the appeal.

Issue (ii): Whether the respondents were entitled to the benefit of set-off under Notification No. 178/77, as amended by Notification No. 295/77, despite the manner and timing of filing the input statement.

Analysis: The notifications exempted finished goods to the extent of duty already paid on Item 68 inputs, and the amended notification required a statement showing the quantity of inputs used. The record showed that the respondents had claimed the benefit early, had supplied details of the raw material composition, had filed declarations and correspondence with the department, and had established actual duty-paid use of sodium sulphate in the manufacture of glass sheets. The Board's circular also supported computation of the set-off on the basis of the quantity of inputs consumed per unit of finished goods. The procedural requirement of filing a revised classification list was held not to arise from the notifications themselves, and the cited precedent was treated as distinguishable on its facts.

Conclusion: The respondents were held entitled to the set-off benefit and the Revenue's challenge failed.

Final Conclusion: The appeal was dismissed after upholding the respondents' entitlement to the notification-based set-off and the consequential refund claim, and the cross-objection abated.

Ratio Decidendi: Where the substantive conditions for an exemption or set-off notification are satisfied, a procedural requirement not expressly mandated by the notification itself cannot defeat the benefit.

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