Exclusion clause under exemption notification requires Revenue to prove ineligibility before denying small-scale industry benefit.

Exemption under Notification No. 175/86-C.E. could not be denied on the exclusion clause without first proving that the brand name owner was ineligible. The Revenue relied on paragraph 7 but produced no evidence that the brand name owner exceeded the small scale industry limit or otherwise fell outside the notification; the appellants' balance-sheet material supported eligibility by showing clearances within the prescribed limit. Since the initial burden to bring the case within the exclusion rested on the Revenue and was not discharged, the exemption was upheld.

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Issues: Whether the Revenue had discharged the burden of proving that the brand name owner was ineligible for the benefit of Notification No. 175/86-C.E., and whether the appellants were therefore entitled to the exemption.

Analysis: The notification granted exemption subject to an exclusion in paragraph 7. The show cause notice invoked that exclusion, but disclosed no evidence to show that the brand name owner was outside the small scale industry limit or otherwise ineligible. The appellants produced balance-sheet material showing clearances within the prescribed limit, supporting the claim that the brand name owner qualified for the exemption. In these circumstances, the initial onus to bring the case within the exclusion clause rested on the Revenue and was not discharged.

Conclusion: The Revenue failed to prove that the brand name owner was ineligible under Notification No. 175/86-C.E., and the appellants were entitled to the exemption.

Ratio Decidendi: Where exemption is denied on the basis of an exclusion clause in the notification, the Revenue must first establish facts bringing the assessee within that exclusion; absent such proof, the exemption cannot be denied.

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