Exemption on actual non-availment of input credit, not hypothetical Modvat entitlement or separate scrap exemption.

An exemption condition requiring that no duty credit be taken on inputs is satisfied where the inputs were actually cleared without duty and no Modvat credit was availed. The separate availability or non-availability of another exemption for waste and scrap does not alter that position, and hypothetical entitlement to credit if the inputs had been procured differently is irrelevant. The text states that denying exemption on the basis of an assumed credit linkage was incorrect, and that the assessee remained entitled to relief under Notification No. 19/88-C.E. as amended.

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Issues: Whether granulated slag was entitled to exemption under Notification No. 19/88-C.E. as amended, and whether denial of that exemption could be justified on the footing that the assessee had obtained the benefit of Notification No. 217/86-C.E. in respect of waste and scrap used in the process.

Analysis: The condition in the exemption notification required only that no credit of duty paid on the inputs used in the manufacture of the exempted goods had been taken. The waste and scrap used as input had itself been cleared without payment of duty, so there was no question of duty credit having been availed on that input. The reasoning that Modvat credit would have been available if the waste and scrap had been procured from outside was treated as hypothetical and impermissible, because the actual fact remained that no Modvat credit was taken. The denial of the exemption to granulated slag was therefore based on an incorrect linkage between the inapplicability of Notification No. 217/86-C.E. to the waste and scrap and the separate condition in Notification No. 19/88-C.E.

Conclusion: The assessee satisfied the condition of Notification No. 19/88-C.E. as amended, and the exemption could not be denied. The demand, penalty, and interest were set aside.

Final Conclusion: The appeal succeeded on merits, with consequential relief granted to the assessee, and the limitation issue was left unexamined.

Ratio Decidendi: Where an exemption notification conditions relief on non-availment of duty credit on inputs, that condition is not breached merely because a different exemption relating to waste or scrap was available or unavailable; actual availment of credit, not hypothetical entitlement to credit, is ative.

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