Direct supply condition in exemption notifications and contract continuity under renewal can determine eligibility for concessional duty.

Notification No. 45/82-C.E. was construed as allowing concessional duty only for medicines supplied directly to the specified Government recipients, so supplies routed through approved chemists did not satisfy the express condition and the exemption was unavailable on that ground. By contrast, where the E.S.I.S. arrangement was validly extended or renewed, the exemption could not be denied merely because the original contract period had ended; the continuity of the underlying contract was a relevant and admissible factor. The discussion therefore distinguishes strict compliance with the direct-supply requirement from contractual continuity under a renewed arrangement.

---

---

Issues: (i) Whether benefit of Notification No. 45/82-C.E. was available where medicines were supplied to approved chemists instead of directly to Government departments. (ii) Whether the benefit of the notification continued for the period covered by extension or renewal of the E.S.I.S. contract.

Issue (i): Whether benefit of Notification No. 45/82-C.E. was available where medicines were supplied to approved chemists instead of directly to Government departments.

Analysis: The notification granted concessional duty only to medicines supplied directly from the factory to specified Government recipients. Supplies routed through chemists, even if facilitated by the E.S.I.S. for administrative convenience, were not within the express language of the exemption. The arrangement through a third agency did not satisfy the condition of direct supply contemplated by the notification.

Conclusion: The denial of the notification benefit on this ground was upheld, against the assessee.

Issue (ii): Whether the benefit of the notification continued for the period covered by extension or renewal of the E.S.I.S. contract.

Analysis: The initial contract period was extended from time to time, and the later period was covered by renewal/extension. A document showing continuation of the arrangement was treated as admissible and relevant. Where the subsequent period is covered by a valid extension of the original contract, the benefit attached to the arrangement cannot be denied merely on the footing that the earlier contract had expired.

Conclusion: The denial of the notification benefit on this ground was set aside and the matter was remitted for examination of the contracts and their continuity, in favour of the assessee.

Final Conclusion: The appeal succeeded only to the extent of the second issue, while the first denial of exemption was sustained, and the matter was sent back for fresh consideration on the contractual continuity aspect.

Ratio Decidendi: A conditional exemption notification must be applied according to its express terms, and a supply made through a third party does not qualify as direct supply unless the notification so permits; however, where the underlying contractual arrangement is validly extended, the exemption cannot be denied merely because the original contract period had expired.

---