Strict construction of exemption notifications preserves Modvat-linked exemption for brass and aluminium waste and scrap.

Waste and scrap of brass and aluminium generated in manufacture remained eligible for exemption under Notifications Nos. 172/84-C.E. and 182/84-C.E. even where Modvat credit had been taken on the raw materials. The text explains that the notifications contained no express bar on availing credit, and fiscal exemptions must be construed strictly on their wording without adding implied disqualifications. It also notes that Rule 57F(4)(a) applies only where the waste is otherwise dutiable, and dutiability must be tested against both the tariff and the exemption notification. Accordingly, availing Modvat credit did not, by itself, deprive the inputs of their duty-paid character.

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Issues: Whether waste and scrap of brass and aluminium arising in manufacture were entitled to exemption under Notifications Nos. 172/84-C.E. and 182/84-C.E. despite Modvat credit having been availed on the raw materials, and whether such credit deprived the inputs of their duty-paid character for the purpose of those notifications.

Analysis: The exemption notifications contained no express restriction or prohibition against availing Modvat credit on the raw materials. In fiscal interpretation, nothing can be added by intendment to the text of an exemption notification, and the notification must be read as it stands. Rule 57F(4)(a) permitted removal of waste only when it was otherwise dutiable, and dutiability had to be tested with reference to the tariff as well as the exemption notification. The absence of any clause barring credit made it impermissible to imply a disqualification. The availment of Modvat credit did not, by itself, strip the inputs of their duty-paid character for the purpose of these notifications.

Conclusion: The waste and scrap remained covered by the exemption notifications notwithstanding the availing of Modvat credit, and the demand of duty was unsustainable.

Ratio Decidendi: An exemption notification in fiscal law must be construed strictly according to its language, and in the absence of an express bar, availing Modvat credit on inputs does not destroy their duty-paid character or negate the exemption.

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