2014 (1) TMI 1519 - HC - Central Excise

Insertion of Explanation in the notification - Whether Retrospective of Prospective - Whether Clarificatory or declaratory - Whether the Tribunal is right in holding that the Explanation to Notifications 16/97CE dated 1.4.97 and 38/97 dated 27.6.97 would have prospective effect, in spite of settled position of law that any Explanation to a Rule or Section is only clarificatory in nature and would have retrospective effect - Held that - inputs as well as the finished goods manufactured by the assessee answer the description of the specified goods - for the purposes of computing the aggregate value of clearances under the notification, the clearances of excisable goods which are chargeable to nil rate of duty or which are exempted from the whole of duty of excise leviable thereon by any notification issued under sub-rule (1) of Rule 8 of the Rules shall not be taken into consideration. In this case, as the finished goods are, admittedly, exempted under Notification Nos.155/1986, 160/1986 and 124/1988, the value of the exempted finished goods will have to be excluded in arriving at the aggregate value for the purposes of the notification. Rationale behind the insertion is that when the specified goods are chargeable to nil rate of duty or exempted under any notification, as the case may be, the specified goods used as inputs are not treated as exempt under clause (c) of Paragraph 3, in which event, they should form part of the aggregate value of clearance. Thus the question of further relief being granted by excluding the inputs from the aggregate value was sought to be set right, so that the notification prescribing the slabs would be more meaningful, but till such time such insertion was made and in the absence of any specific provision restricting the scope on the specified goods with reference to their chargeability to nil rate of duty or exempt from the whole of duty under any other notification, paragraph 3, as it existed during the relevant point of time, cannot, in any manner, be read down - notification No.69 of 1997 dated 03.12.1997 inserting clause (f) in Explanation to paragraph 5 is only prospective in nature and consequently would not be of any relevance to the case on hand - Decided against Revenue.

Summary

Issues Involved:

1. Retrospective vs. Prospective Effect of Explanations to Notifications.
2. Equating Provisions of Different Notifications.
3. Interpretation of Supreme Court Decisions.
4. Restriction on Department by Tribunal's Order.

Issue-Wise Detailed Analysis:

1. Retrospective vs. Prospective Effect of Explanations to Notifications:

The core issue was whether the Explanation to Notifications 16/97-CE dated 01.04.1997 and 38/97 dated 27.06.1997 should have retrospective effect. The Revenue argued that any Explanation is clarificatory and thus retrospective. However, the Tribunal held that the amendment brought by Notification No.69/97 dated 03.12.1997 was substantive and not merely clarificatory, thus having only prospective effect. The High Court upheld this view, stating, "We do not accept the contention of the Revenue that the insertion of clause (f) and (G) in paragraph 5 of the notification has to be read as having retrospective effect."

2. Equating Provisions of Different Notifications:

The Revenue contended that the Tribunal incorrectly equated the provisions of Explanations II and III to Notification No.175/86-CE dated 01.03.1986 with the Explanation to clause (c) of para 3 of Notification No.16/97-CE dated 01.04.1997 and Explanation (G) to Notification 38/97 dated 27.06.1997. The Tribunal, however, found that the provisions under Notification No.67/1995 dated 16.03.1995 and Notification No.16/1997 dated 01.04.1997 were distinct. The High Court agreed, noting, "The difference between Paragraph 3(c) and the newly inserted clause (f) in the Explanation is thus clear."

3. Interpretation of Supreme Court Decisions:

The Tribunal's interpretation of the Supreme Court decisions in Jalaram Wood Crafts and Universal Electrical cases was challenged by the Revenue. The High Court supported the Tribunal's interpretation, emphasizing the rationale behind the provisions and the legislative intent. The Court cited the decision in Collector of C.Ex., New Delhi Vs. Universal Electrical Industries, stating, "The rationale behind the insertion is that when the specified goods are chargeable to nil rate of duty or exempted under any notification...the specified goods used as inputs are not treated as exempt."

4. Restriction on Department by Tribunal's Order:

The Tribunal had restricted the department while ordering remand proceedings, which the Revenue argued was based on wrong interpretations. However, the High Court found no fault with the Tribunal's order, stating, "We do not accept the plea of the Revenue that the inserted clause (f) in paragraph 5 has to be given retrospective effect."

Conclusion:

The High Court dismissed the Revenue's appeals, affirming that the amendment brought by Notification No.69/97 dated 03.12.1997 is prospective in nature and not retrospective. The Court stated, "We reject the plea of the Revenue that the amendment brought to the Explanation is always clarificatory in nature, hence, retrospective." Consequently, the Civil Miscellaneous Appeals were dismissed, and the Tribunal's order was upheld.