Substantial compliance with cheque-payment conditions can preserve excise exemption where equivalent banking instruments are used.

Exemption under Notification No. 47/90-C.E. was examined for yarn supplied to a registered cooperative society where payment was made by demand draft or letter of credit instead of a cheque drawn on the purchaser's own bank account. The payment condition was treated as directory, not mandatory, because the purchaser was otherwise eligible and the banking instruments used amounted to substantial compliance with the notification. On that basis, the substantive exemption requirement was satisfied and the exemption remained available.

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Issues: Whether exemption under Notification No. 47/90-C.E. dated 20-3-1990 was admissible when the prescribed payment mode of cheque drawn on the purchaser's bank account was not strictly followed, but payment was made through demand draft or letter of credit by a registered cooperative society.

Analysis: The notification required yarn supplied to a registered cooperative society or approved organisation to be paid for by cheque drawn on its own bank account. On the facts found, the purchaser was a registered cooperative society and payment was made through demand draft or letter of credit. The earlier tribunal view treated the cheque requirement as directory rather than mandatory, and the present facts showed substantial fulfilment of the payment condition. The exemption condition was therefore satisfied in substance.

Conclusion: The condition regarding payment by cheque was held to be directory, and substantial compliance through demand draft or letter of credit was sufficient. The exemption was admissible, and the appeal succeeded.

Ratio Decidendi: Where a notification prescribes payment by cheque drawn on the purchaser's own bank account, substantial compliance through equivalent banking instruments may satisfy the condition if the requirement is directory and the substantive eligibility criteria are met.

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