2008 (4) TMI 817 - AT - Central Excise

Summary

Issues involved: Interpretation of small scale notification No. 9/2003-C.E. regarding switching options for availing duty exemption within the same financial year.

Summary:

Issue 1: Interpretation of notification regarding switching options for availing duty exemption

The appellants, engaged in manufacturing Organic Chemicals and Optical Brightening Agent, availed the benefit of small scale notification No. 9/2003-C.E. from April '04, paying duty at a concessional rate of 9.6%. However, they opted out of the exemption from May '04 to August '04, paying duty at the full rate of 16%. Subsequently, from September '04 to December '04, they again cleared goods at the concessional rate. The issue arose when proceedings were initiated against the appellants for demanding differential duty for clearances from September '04 to December '04 due to the restriction in the notification against switching options within the same financial year.

Issue 2: Applicability of notification clause on option withdrawal

The notification specified that once the option for availing exemption is exercised, it cannot be withdrawn during the remaining part of the financial year. The Tribunal observed that the appellants, by opting for the notification at the start of the financial year, were not allowed to withdraw from it. The question arose whether the appellants could switch back to the exemption after paying duty at the full rate from May '04 onwards.

Issue 3: Determination of duty liability based on option exercise

The Tribunal concluded that the violation of conditions could not act retrospectively, and duty could not be demanded for the period before opting out of the exemption. While no duty was confirmed for the period before May '04, duty was confirmed for September '04 to December '04 when the appellants reverted to the concessional rate. The Tribunal upheld the duty demand for this period as the appellants were bound to clear goods at the full rate after opting out in May '04.

Conclusion:

The Tribunal confirmed the duty demand for the period September '04 to December '04 but did not impose any penalty as the issue involved a bona fide interpretation of the notification. The appeal was disposed of accordingly on 3-4-2008.