1987 (8) TMI 1 - HC - Central Excise

If there has to be any exemption, or classification that necessarily must be done by the legislature and not by virtue of any power to issue exemption notification under Rule 8(1) or (2) of the Central Excise Rules

Summary

Issues:
1. Interpretation of exemption notification for plastic articles under Tariff Item No. 15A(2) of the Central Excise and Salt Act, 1944.
2. Validity of the Government's definition of "rigid" and "flexible" for plastic articles.
3. Authority to classify articles for exemption under Rule 8 of the Central Excise Rules.

Detailed Analysis:

Issue 1:
The petitioners, manufacturers of "PTFE Sheets," sought exemption under a notification dated May 29, 1971, for plastic articles under Tariff Item No. 15A(2). The court, in a previous petition, held that the petitioners' articles were not "rigid" and thus entitled to the exemption. However, a subsequent notification by the Government attempted to define "rigid" and "flexible," leading to a challenge in the present petition.

Issue 2:
The petitioners argued that the Government overstepped its authority by introducing a norm or standard to classify "rigid" and "flexible" articles, which should be the legislature's prerogative. Reference was made to a judgment emphasizing that classification for duty rates should be done by the legislature, not taxing authorities. The court noted that the terms "rigid" and "flexible" were previously understood based on trade and industry practices, and the Government's attempt to redefine these terms was deemed invalid.

Issue 3:
The respondents contended that the Government's explanation aimed to clarify the classification of articles for manufacturers to benefit from exemptions, resolving previous controversies. However, the court rejected this argument, emphasizing that classification and exemptions must be legislated, not defined through notifications. The court held that the Government's attempt to classify articles through an explanation was beyond the scope of its authority under Rule 8 of the Central Excise Rules.

Conclusion:
The court ruled in favor of the petitioners, holding the Government's attempt to redefine "rigid" and "flexible" articles through a notification as invalid. The petitioners were entitled to the exemption, and the deposited amount was ordered to be returned. The judgment highlighted the importance of legislative classification for exemptions and reiterated that such classifications cannot be established through executive notifications.