2015 (9) TMI 690 - HC - Central Excise

SSI Exemption - availing SSI benefit for one unit and paying full rate of duty from another unit simultaneously - Denial of exemption benefit under Notification No. 1/93-CE dated 28.02.1993 - Held that - A bare reading of the amendment, which was inserted in the early Notification 1/93-CE, appears to suggest that this was done as manufacturers were coming in and out of this exemption. They first used to opt for exemption in a financial year and thereafter for other clearances they opted out of the exemption. The extended meaning of the amendment which says subject to the condition that such manufacturer shall pay duty at the rate applicable but aforesaid exemption on all subsequent clearances of specified goods made after availing such option, in a financial year in which such date of option falls, shows the real intention behind the amendment. - if an aggregate value of the total clearance of a manufacturer exceeds rupees two crore in the preceding financial year, it cannot claim exemption under the notification. There are other similar provisions with the same goal in mind. The most important and in fact the decisive words in para 2 of the Notification No.1/93-CE is that only such clearances can get exemption where the aggregate value of the clearances of the specific goods for home consumption is of a certain value. The provision in the main Notification No.1/93-CE as well as the amended Notification No. 59/94 have been placed in order to check this abuse. It is for this reason that we find that once the respondent had exercised to keep out of the exemption for its Sitapur unit, it cannot claim benefit of the notification for its Dehradun unit consequently the demand of the excise authorities is justified. We have no difficulty in accepting the legal proposition that fiscal laws have to be strictly interpreted. That is the settled manner of interpretation of fiscal statutes. - manufacturer could not have availed the benefit of exemption under Para (1) of the Notification No. 01/93-CE dated 28.02.1993, since it had opted to full rate of duty in a financial year in relation to its other unit. - Decided in favour of Revenue.

Summary

Issues:
1. Interpretation of Notification No. 1/93-CE and Notification No. 59/94-CE regarding excise duty exemption for small scale industries.
2. Whether a manufacturer can avail exemption for one unit while opting out of exemption for another unit.
3. Application of strict interpretation in fiscal laws and exemption clauses.

Issue 1: The judgment primarily revolves around the interpretation of Notification No. 1/93-CE and its amendment by Notification No. 59/94-CE, aimed at providing exemptions for small scale industries. The court analyzed the provisions to determine the extent to which the respondent could avail the benefits and whether their actions were permissible under the law. The notifications set limits and conditions for exemptions to ensure deserving small scale industries benefit from them. The court emphasized the importance of the aggregate value of clearances by a manufacturer in a financial year to qualify for exemptions.

Issue 2: Another crucial aspect of the judgment was whether a manufacturer could choose to avail exemption for one unit while opting out of exemption for another unit. The appellant argued that once a manufacturer opts out of exemption for one unit, it cannot claim exemption for another unit. The court analyzed the language of the amendment, focusing on the term "manufacturer" exercising the option, not individual units. The court concluded that the respondent could not claim exemption for the Dehradun unit after opting out for the Sitapur unit, upholding the demand by excise authorities.

Issue 3: The judgment delved into the application of strict interpretation in fiscal laws and exemption clauses. The court highlighted the need to strictly interpret fiscal laws, especially exemption clauses, as they are exceptions created by law. While acknowledging the possibility of a wider interpretation if the exemption is deemed proper, the court emphasized the strict interpretation of exemption clauses. The court rejected the argument for a liberal construction based on a Supreme Court precedent, stating that exemption provisions should be strictly construed initially, with a wider interpretation applicable only after ambiguity is resolved.

In conclusion, the court allowed the appeal, setting aside the order of the Customs, Excise & Service Tax Appellate Tribunal. The court answered the framed question of law negatively, indicating that the manufacturer could not avail the exemption under Notification No. 01/93-CE since it had opted for the full rate of duty for another unit in a financial year.