Strict construction of exemption notifications cannot justify differential duty when duty-free clearances stayed within prescribed limits.

An exemption notification must be construed strictly, but not in a way that leads to an absurd result. Where goods were cleared within the prescribed limits for duty-free clearance, the assessee could not be denied the notification benefit merely because Modvat credit was not availed. The record did not support a demand for differential duty on the basis that the assessee had chosen a particular route under the notification, and calculation of duty at the tariff rate was unwarranted on those facts. The demand for differential duty was therefore not sustainable, and relief followed.

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Issues: Whether the assessee, having cleared goods at concessional duty rates without availing Modvat credit, could be denied the benefit of the exemption notification and saddled with differential duty on the ground that it had chosen a particular route under the notification.

Analysis: The notification was required to be construed strictly, but a construction producing an absurd result was to be avoided. The clearances were within the limits prescribed for duty-free clearance, and the record did not justify demanding differential duty merely because Modvat credit had not been taken. On these facts, there was no basis to sustain the demand calculated on the tariff rate.

Conclusion: The demand for differential duty was not sustainable and the assessee was entitled to relief.

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