2014 (11) TMI 455 - HC - Central Excise

Notification 16/97 CE, dated 1.4.1997 - Propective or retrospective - inclusion or exclusion of the value of the inputs used in the manufacture of final product in computing the aggregate value of clearances - Held that - Following decision of Commissioner of Central Excise, Chennai v. Customs Excise and Service Tax Appellate Tribunal Chennai and another 2014 (1) TMI 1519 - MADRAS HIGH COURT the amendment is only prospective, hence, would not govern the case of the assessee. - Decided against Revenue.

Summary

Issues involved: Interpretation of the prospective effect of an explanation to a notification, equating different provisions of notifications, relevance of Supreme Court decisions in interpreting the issue, restricting department in remand proceedings.

Analysis:
1. The appeals were filed against Final Order Nos.932 and 931 of 2006 passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai, based on substantial questions of law. The first issue revolved around the prospective effect of an explanation to a notification, questioning if the Tribunal was correct in holding it as prospective despite the settled position that explanations are clarificatory and have retrospective effect.

2. The second issue dealt with equating provisions of different notifications, specifically Explanation II and III to Notification No.175/86 CE with the Explanation to Clause (c) of para 3 of Notification No.16/97 CE. The Tribunal's interpretation was challenged for not distinguishing between the two sets of provisions concerning the computation of aggregate value of clearances and duty on inputs.

3. The third issue raised was about the Tribunal's interpretation of Supreme Court decisions in Commissioner of Central Excise v. Jalaram Wood Crafts (P) Ltd. and Commissioner of Central Excise v. Universal Electrical Industries. The relevance of these decisions in the context of the instant issue was questioned.

4. The fourth issue questioned the Tribunal's restriction on the department during remand proceedings, alleging wrong interpretations and failure to follow the Supreme Court's guidance on the retrospective effect of an explanation clause to the notification.

5. A Division Bench of the Madras High Court had previously addressed the first and second issues in a separate case and ruled against the revenue. The Bench held that the inserted clause in the notification should be prospective and not retrospective, rejecting the revenue's plea that the amendment was clarificatory and hence retrospective.

6. The High Court, in the current judgment, agreed with the Division Bench's interpretation of the law. Consequently, the substantial questions of law (i) and (ii) were answered against the Revenue. As a result, the remaining questions (iii and iv) were deemed academic and not addressed in the present appeals.

7. Therefore, the High Court dismissed the appeals, stating that the questions of law (iii) and (iv) were now irrelevant. The court upheld the decision that the amendment to the notification was prospective, in line with the law declared by the Apex Court, and closed the connected Miscellaneous Petitions accordingly.