Selective exemption and Modvat credit cannot be claimed together where the larger Bench view prevails over an unreasoned dismissal.

An assessee could not simultaneously claim full exemption under Notification No. 175/86-C.E. for some products while denying the exemption for other products and taking Modvat credit on those others. The trade notice relied on did not relate to that notification and did not support such selective treatment. A dismissal of an appeal against an earlier view in limine or otherwise not on merits does not amount to approval of that view, so it cannot override the larger Bench ruling in Kharia Cement Works. The larger Bench position therefore prevails, and the departmental appeals succeeded.

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Issues: Whether the assessee could take full exemption under Notification No. 175/86-C.E. for some products and decline the exemption for other products while availing Modvat benefit on the latter.

Analysis: The trade notice relied upon did not pertain to Notification No. 175/86-C.E. and therefore did not support the assessee's case. The earlier decision in Faridabad Tools was followed by the assessee, but the larger Bench had preferred the contrary view in Kharia Cement Works and had affirmed that line of reasoning. The dismissal of the department's appeal against Faridabad Tools by the Supreme Court did not amount to affirmation of that decision on merits, and could not displace the larger Bench view.

Conclusion: The assessee was not entitled to avail exemption for some goods and Modvat benefit for others.

Final Conclusion: The departmental appeals succeeded, the appellate order was set aside, and the order of the Assistant Collector was restored.

Ratio Decidendi: Dismissal of an appeal in limine or otherwise not on merits does not affirm the ratio of the order appealed against, and the law declared by the larger Bench prevails.

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