2005 (2) TMI 137 - SC - Central Excise

Whether Notification No. 95/94, dated April 25, 1994 was retrospective in nature and exemption ought to be considered and granted from March 1, 1994? Held that - In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory promises, it could not be said that while issuing Notification No. 46/94 of March 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory Notification No. 95/94 on April 25, 1994. It was not a new notification granting exemption for the first time in respect of parts of power driven pumps to be used in the factory for manufacture of pumps but clarified the position and made the position explicit which was implicit. Thus the appeals deserve to be allowed and are allowed accordingly.

Summary

Issues Involved:
1. Exemption of power-driven pumps and parts from excise duty.
2. Retrospective application of Notification No. 95/94.
3. Validity of the demand for excise duty for the period between March 1, 1994, and April 21, 1994.
4. Interpretation of clarificatory notifications.

Issue-wise Detailed Analysis:

1. Exemption of Power-Driven Pumps and Parts from Excise Duty:
The appellant is a manufacturer of power-driven pumps and parts thereof designed for handling water. Since 1978, power-driven pumps and parts used in their manufacture within the factory have been exempted from excise duty through various notifications. The Government rescinded 389 notifications on March 1, 1994, and issued a consolidated Notification No. 46/94, which inadvertently omitted the exemption for parts used within the factory. This omission was rectified by Notification No. 95/94 on April 25, 1994, clarifying that parts used in the manufacture of power-driven pumps within the factory would continue to be exempted.

2. Retrospective Application of Notification No. 95/94:
The appellant argued that Notification No. 95/94 was clarificatory and should be applied retrospectively from March 1, 1994. The Government's policy since 1978 had not changed, and the omission in Notification No. 46/94 was a mistake. The subsequent notification merely clarified this error and should be considered retrospective. The Court agreed, noting that the consistent policy was to exempt parts used within the factory, and the clarificatory notification made explicit what was implicit.

3. Validity of the Demand for Excise Duty for the Period Between March 1, 1994, and April 21, 1994:
Show cause notices were issued to the appellant for clearing parts without payment of duty between March 1, 1994, and April 21, 1994. The authorities below upheld the demand for excise duty for this period. However, the Court found that the demand was invalid because the exemption policy had not changed, and Notification No. 95/94 clarified the existing exemption.

4. Interpretation of Clarificatory Notifications:
The Court relied on the precedent set in *Collector of Central Excise, Shillong v. Wood Craft Products Ltd.*, where it was held that a clarificatory notification takes effect retrospectively. Such notifications clarify the position and make explicit what was implicit. The Court concluded that Notification No. 95/94 was clarificatory and not a new exemption, thus applying retrospectively to cover the period in question.

Conclusion:
The appeals were allowed, and the orders demanding excise duty were set aside. The Court directed that any deposits made by the appellant be refunded. There was no order as to costs. The judgment reinforced the principle that clarificatory notifications have retrospective effect and upheld the consistent government policy of exempting parts used in the manufacture of power-driven pumps within the factory from excise duty.