2016 (8) TMI 32 - AT - Central Excise

Classification - Effect of conversion from 6 digit classification to 8 digit classification w.e.f. 1.3.2015 - continuity of exemption for fruit preparations put up in unit containers and bearing a brand name - Held that - the appellant claimed that the notification of 2005 was not a substitute for earlier notification but was necessitated to give effect to nil rate of duty in the erstwhile tariff as notification No. 6/2002-CE was related to goods packed and presented in the manner described in the tariff; hence the contention of the appellant that the 2005 notification supplemented the earlier notification. It was also brought to our notice that the 2002 notification was rescinded by notification no.2/2006-CE dated 1st March 2006 to convince us that the interpretation placed by Revenue was not tenable. From a reading of the circular dated 25th February 2005, supra, it appears that the exercise of transiting to eight digit code in the tariff was not intended to alter the effective duty structure in any manner. Implementation of this intent was possible only by harmonious reading of the two notifications. From the factual matrix, it would therefore, appear that notification 3/2005-CE excludes goods of upto 20 put up in a unit container and bearing a brand name because that being already covered by the existing notification 6/2002-CE did not require reiteration. That the two were intended to operate as mutually exclusive exemptions is also amply clear from the rescinding of the 2002 notification by notification no. 21/2006-CE dated 21st March 2006. The said notification goes on to grant immunity to all acts prior to the rescinding by incorporation of except as respects things done or omitted to be done before such reasons. Benefit of exemption allowed - Decided in favor of assessee.

Summary

Issues:
Dispute on eligibility for exemption in notification no.6/2002-CE dated 01-03-2002 in relation to clearance effected between March 2005 and December 2005.

Analysis:

1. The appellant, a manufacturer of Yumsticks, claimed exemption under notification no. 6/2002-CE dated 1st March 2002 until February 2005. The classification changed to 2007 of CETH from March 2005 onwards. The appellant continued to clear goods under the old tariff heading and availed exemption. A Show Cause Notice was issued denying the exemption, resulting in a confirmed duty liability, interest, and penalty by the original and appellate authorities.

2. The appellant argued that they were eligible for exemption under notification No.6/2002-CE for goods put up in unit containers and bearing a brand name. The conversion to an eight-digit classification was intended to continue the existing exemption until the issuance of notification no. 1/2005-CE. The appellant contended that the 2005 notification was not a substitute but a supplement to the earlier notification.

3. The Revenue argued that the 2005 notification excluded goods put up in unit containers and bearing a brand name to levy duty on such goods. However, the Tribunal found that a specific exemption notification was necessary to maintain a revenue-neutral transition and that the exclusion did not revise the earlier exemption.

4. The Tribunal held that the intention behind the 2005 notification was to retain effective rates and ensure a harmonious reading of both notifications. The rescinding of the 2002 notification and the subsequent immunity granted to goods cleared under it indicated the continuity of the exemption.

5. The Tribunal emphasized that the two notifications operated as mutually exclusive exemptions, with the rescinding notification providing immunity to goods cleared under the old notification. The Tribunal referred to previous judgments supporting the principle that the assessee is entitled to the beneficial consequence between existing alternative notifications.

6. Consequently, the Tribunal set aside the impugned order and allowed the appeal, stating that the notice issued to the appellant lacked legal sustenance, and all proceedings based on it were deemed improper.