IN THE HIGH COURT OF KERALA AT ERNAKULAM
C.E.Appeal.No. 18 of 2006()
1. THE COMMISSIONER OF CENTRAL EXCISE &
... Petitioner
Vs
1. M/S. MUSTANG RUBBERS INDUSTRIAL ESTATE,
... Respondent
For Petitioner :SRI.JOHN VARGHESE, ASSISTANT SG
For Respondent :SRI.JOSEPH KODIANTHARA
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :09/06/2008
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ.
-------------------------
C.E.A. Nos.18 & 19 of 2006
---------------------------------
Dated, this the 9th day of June, 2008
J U D G M E N T
Ramachandran Nair, J.
These connected appeals filed under Section 35(G) of the
Central Excise Act are against the common order of the Customs,
Excise & Service Tax Appellate Tribunal holding that respondents
are entitled to benefit of Annexure-B notification issued by
Government of India on 11/08/2003 retrospectively from
01/04/2003. Respondents are limited companies mainly engaged
in manufacture of tread rubber. Besides producing and clearing
excisable goods on their own account, these companies are
engaged in manufacturing and processing of goods for other parties
including tyre companies on job work basis. Notification
No.9/2003-C.E issued on 01/03/2003 provides concessional rate of
duty at 60% of normal rate of duty for first clearances up to rupees
one crore and exemption from payment of duty for clearances of
specified goods under certain conditions. The benefit of concession
and exemption under Clause 2(vi) of this notification is available
only if the aggregate value of clearances of all excisable goods for
CEA Nos.18 & 19/2006
-2-
home consumption by a manufacturer from one or more factories,
or from a factory by one or more manufacturers, does not exceed
rupees three hundred lakhs in the preceding financial year. There
is no dispute that the aggregate value of clearances of all excisable
goods for home consumption includes value of goods manufactured
and cleared on job work basis also. Since the respondents’ total
clearances including value of goods cleared on job work basis
exceeded Rs.3 crores during the preceding financial year,
respondents were not entitled to benefit of notification in the form
of concession and exemption from duty. However, the Government
in exercise of powers conferred under Section 5A(1) of the Central
Excise Act, issued Annexure-B Notification on 11/08/2003,
whereunder Annexure-A, Notification No.9/03, is amended
introducing Clause (e) to Clause 3A of Notification No.9/03. Clause
3A of Notification No.9/03 introducing clause (e) is extracted
hereunder for easy reference.
“3A. For the purposes of determining the aggregate value of
clearances of all excisable goods for home consumption,
mentioned in clause (vii) of paragraph 2 of this notification, the
following clearances shall not be taken in to account namely:-
(a) --------------
(b) --------------
(c) --------------
(d) --------------
CEA Nos.18 & 19/2006
-3-
(e) clearances, which are exempt from the whole of the
excise duty leviable thereon under notifications No.214/86-
Central Excise, dated the 25th March, 1986 [G.S.R.547(E),
dated the 25th March, 1986], or No.83/94-Central Excise, dated
the 11th April, 1994 [G.S.R.375(E), dated the 11th April, 1994],
or No.84/94-Central Excise, dated the 11th April, 1994
[G.S.R.376(E), dated the 11th April, 1994].”
Notification No.214/86 referred to in the clause above provides for
exemption of duty on goods cleared on job work basis. Consequent
upon this amendment to Notification No.9/03, the aggregate value
of clearances in the preceding year for the purpose of exemption /
concession will be reckoned after excluding the value of goods
cleared on job work basis. By excluding the turnover of value of
clearances on job work of both the respondents for the previous
financial year, both the respondents are eligible for concession /
exemption under Notification No.9/03. However, since the benefit
accrued to respondents by Annexure-B Notification was issued on
11/08/2003, the Department granted the benefit only with effect
from that date. Consequently, respondents are called upon to pay
duty at normal rate for goods cleared up to 10/08/2003. Even
though, the first appeal filed against the demand of duty was
unsuccessful, respondents filed second appeal before the Tribunal.
CEA Nos.18 & 19/2006
-4-
The Tribunal allowed the appeal holding that Annexure-B
Notification applies to the previous financial year also, even though
the same was issued only on 11/08/2003. It is against this
common order of the Tribunal, the Commissioner of Central Excise
has filed these appeals.
2. We have heard Shri.P.Parameswaran Nair, Assistant
Solicitor General, appearing for appellant and Shri. Joseph
Kodiyathara, appearing for respondents.
3. Learned counsel appearing for appellant contends that
Annexure-B notification is in force only prospectively and therefore,
the benefit of notification granted to respondents by the Tribunal
retrospectively from the beginning of the financial year is illegal and
arbitrary. On the other hand, learned counsel for respondents
contended that exemption is with reference to previous year’s turn
over and when Annexure-B Notification was issued excluding the
value of clearances made on job work basis on the turn over,
respondents are entitled to have concession / exemption under
Notification No.9/03 and the basis of liability under the Notification
though changed by Annexure-B Notification dated 11/08/2003, it
applies from 01/04/2003 onwards. He has also referred to the
decision of the Supreme Court in Mangalore Chemicals &
CEA Nos.18 & 19/2006
-5-
Fertilizers Ltd Vs. Deputy Commissioner, reported in 1991(55)
ELT 437, whereunder the Supreme Court has held that notification
granting exemption should be given wide and liberal construction.
We are unable to agree with the finding of the Tribunal that
prospectivity of notification has no relevance. In fact, the scope of
a notification has to be considered with reference to the statutory
provisions under which it is issued. It is the admitted position that
without Annexure-B Notification, the respondents would not have
been benefited by Annexure-A Notification providing for
concession / exemption of duty. We find that Annexure-A
Notification, No.9/03, and the notification amending it, namely
Annexure-B Notification issued on 11/08/2003, were issued by the
Government of India in exercise of powers conferred under Section
5A(1) of the Central Excise Act. Clause (5) to Sec.5A is as
follows :-
5A (5) : “Every notification issued under sub-section (1) or (sub
Sec.2(A)) shall-
(a) unless otherwise provided, come into force on the date of
its issue by the Central Government for publication in the Official
Gazette.
(b) also be published and offered for sale on the date of its
issue by the Directorate of Publicity and Public Relations,
Customs and Central Excise, New Delhi, under the Central Board
of Excise and Customs constituted under the Central Boards of
CEA Nos.18 & 19/2006
-6-
Revenue Act, 1963.”
It is clear from the above clause that unless otherwise provided,
notification issued under Section 5A(1) will come in to force on the
date of it’s issue. Since Annexure-B Notification amending
Annexure-A Notification does not provide for retrospectivity, it
comes into force on the date of issue, namely 11/08/03, as
provided under Clause 5(a) to Section 5A of the Central Excise Act.
In fact, this means that respondents are not entitled to benefit of
amendment to Annexure-A Notification (No.9/03) up to 10/08/2003
and are liable to pay duty at normal rate for clearances made up to
that date. However, by virtue of exclusion of job work turn over
provided under Annexure-B Notification issued on 11/08/03,
respondents will be entitled to benefit of amended Annexure-A
Notification with effect from the date on which it was amended vide
Annexure-B Notification. In other words, concession / exemption
on clearances will be available to respondents only by virtue of
Annexure-B Notification with effect from the date on which that
notification came in to force i.e. 11/08/2003. We do not know on
what basis, the Tribunal has held that prospectivity has no
relevance in this case. The Tribunal, instead of considering the
scope of notifications with reference to the statutory provisions,
CEA Nos.18 & 19/2006
-7-
under which those are issued, considered the scope of the statutory
provisions with reference to the notifications issued. The Tribunal
ought to have taken into account the powers of the Government,
even to rescind Annexure-B Notification or to change the pattern of
exemption available under Annexure-A as amended by Annexure-B
Notification. The very purpose of Clause 5(a) to Section 5A is to
cloth the Government with the power to grant benefit of any
notification retrospectively wherever it is required or desirable. It is
for the Government to consider whether a notification should be
given retrospectivity, and if so, up to what period and unless it is so
provided, the Tribunal or even the High Courts have no power to
grant retrospectivity for a notification in the interpretation process.
We, therefore, allow the appeals by quashing the orders of the
Tribunal and restoring the original orders confirmed in first appeals.
(C.N.RAMACHANDRAN NAIR, JUDGE)
(V.K.MOHANAN, JUDGE)
jg