Substantive exemption and credit relief cannot be denied for procedural lapse where receipt, use, and accounting are undisputed.

A substantive exemption or Rule 56A credit benefit cannot be denied merely because separate prior permission was not obtained for switching to Notification No. 66/83-C.E., where the goods were accounted for and their receipt and use in manufacture were undisputed. The omission was treated as a procedural lapse, not a ground to refuse relief. Penalty was also unsustainable because the record did not establish clandestine removal, suppression, or intent to evade duty; the shortage noticed on verification was not shown to involve unauthorised diversion. Consequential relief followed.

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Issues: (i) Whether the assessee could be denied the benefit of nil duty exemption and related credit treatment for rotors and stators on the ground that prior permission under Rule 56A had not been separately obtained for switching to Notification No. 66/83-C.E., dated 1-3-1983; (ii) Whether the penalty was sustainable in the absence of clandestine removal or intent to evade duty.

Issue (i): Whether the assessee could be denied the benefit of nil duty exemption and related credit treatment for rotors and stators on the ground that prior permission under Rule 56A had not been separately obtained for switching to Notification No. 66/83-C.E., dated 1-3-1983.

Analysis: The credit scheme under Rule 56A contained both substantive and procedural requirements. The final products were accounted for, duty on electric fans had been discharged, and the rotors and stators were shown to have been used in the manufacture of fans. The omission to obtain separate prior permission for the exemption option was treated as a procedural lapse. In the absence of any dispute as to receipt, identity, or use of the goods, substantive benefit could not be denied merely for technical non-compliance.

Conclusion: The assessee was entitled to relief and the benefit could not be denied solely on this procedural ground.

Issue (ii): Whether the penalty was sustainable in the absence of clandestine removal or intent to evade duty.

Analysis: The record did not establish clandestine removal or a deliberate suppression of facts with intent to evade duty. The shortage noticed on verification was not shown to have arisen from unauthorised diversion, and the goods were accepted to have been used in the manufacture of electric fans. On these facts, the default was only technical and did not justify penal action.

Conclusion: The penalty was not sustainable and was liable to be set aside.

Final Conclusion: The impugned order could not be sustained, and the assessee was entitled to consequential relief in law.

Ratio Decidendi: A substantive exemption or credit benefit cannot be denied for a mere procedural lapse where the receipt and use of inputs or intermediate goods are undisputed and there is no clandestine removal or intent to evade duty.

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