TRIBUNAL OR EVEN HIGH COURTS HAVE NO POWER TO GRANT RETROSPECTIVTY FOR A NOTIFICTION IN THE INTERPRETATION PROCESS

[Mr. M. GOVINDARAJAN]

Section 5A of Central Excise Act, 1944 provides that if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the official gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon.

Section 5A (5) provides that every notification issued shall-

Unless otherwise provided, come into force on the date of its issue by the Central government for publication in the Official Gazette;

Also be published and offered for sale on the date of its issue by the Directorate of Publicity and Public Relations, Customs and Central Excise, New Delhi, under the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963. 

From the above it is clear that unless otherwise provided, notification issued under Section 5A will come into force on the date of its issue. It is the Central Government to consider whether a notification should be given retrospectivity, and if so, up to what period.  The tribunal is having no power to grant retrospectivity for a notification in the interpretation process. This view is upheld by Kerala High Court in 'Commissioner of Central Excise V. Mustang Rubbers Industrial Estate' - [2009 -TMI - 33677 - KERALA HIGH COURT]

In this case the respondents are limited companies mainly engaged in manufacture of tread rubber.  Besides producing and clearing excisable goods on their own account, these companies are engaged in manufacturing and processing of goods for other parties including tyre companies on job work basis. Notification No. 9/2003-CE, dated 01.03.2003 provides concessional rate of duty at 60% of normal rate of duty for first clearances up to rupees one crore and exemption from payment of duty for clearances of specified goods under certain conditions. This concession is available only if the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers does not exceed rupees three hundred lakhs in the preceding financial year. Since the respondents' total clearances including value of goods cleared on job work basis exceeded Rs.3 crores during the preceding financial year, respondents were not entitled to benefit of notification in the form of concession and exemption from duty.

The Central Government by virtue of powers granted in Section 5A issued Annexure B notification on 11.8.2003 where under Annexure A, Notification No. 9/03 is amended introducing Clause (e) to Clause 3A of notification No. 9/03. Consequent upon this amendment the aggregate value of clearances in the preceding year for the purpose of exemption/concession will be reckoned after excluding the value of goods cleared on job work basis. By excluding the turnover of value of clearances on job work of the respondents for the previous financial year the respondents are eligible for concession/exemption. However the benefit accrued to the respondents by Annexure-B Notification was issued on 11.8.2003 the Department granted the benefit only with effect from that date and the respondents are called upon to pay duty at normal rate for goods cleared up to 10.8.2003. The first appeal was decided against the respondents by Commissioner (Appeals). In the second appeal the tribunal decided in favor of the respondents holding that Annexure - B Notification applies to the previous financial year also, even though the same was issued only on 11.08.2003. Hence the department filed this appeal with the High Court.

The Department submitted the following arguments before the Court:

Annexure B notification is in force only prospectively and therefore, the benefit of notification granted to respondents by the Tribunal retrospectively from the beginning of the financial year is illegal and arbitrary;

The order of the tribunal shall be set aside.

The respondents submitted the following arguments before the Court:

The exemption is with reference to previous year's turnover and when Annexure - B Notification was issued excluding the value of clearances made on job work basis on the turn over, respondents are entitled to have concession/exemption under Notification No.09/03 and the basis of liability under the Notification though changed by Annexure-B Notification dated 11.8.2003, it applies from 01.04.2003 onwards;

In 'Mangalore Chemicals & Fertilizers Ltd., V. Deputy Commissioner' - 1991 (55) ELT 432, the Supreme Court has held that notification granting exemption should be given wide and liberal construction.

The Court after considering the arguments of both parties held as below:

Ø      We are unable to agree with the finding of the tribunal that prospectivity of notification has no relevance. The scope of the notification has to be considered with reference to statutory provisions under which it is issued;

Ø      It is admitted position that without Annexure - B Notification, the respondents would not have been benefited by Annexure A Notification;

Ø      Since Annexure B Notification amending Annexure A does not provide for retrospectivity, it comes into force on the date of issue, namely 11.08.2003, as provided under clause 5(a) to Section 5A of the Central Excise Act;

Ø      This means that the respondents are not entitled to benefit of amendment to Annexure A notification up to 10.03.20083 and are liable to pay at normal for clearances made up to that date;

Ø      The tribunal instead of considering the scope of notifications with reference to the statutory provisions under which those are issued, considered the scope of the statutory provisions with reference to the notifications issued;

Ø      The tribunal ought to have taken into account the powers of the Government;

Ø      It is for the Government to consider whether a notification should be given retrospectivity, and if so, up to what period and unless it is so provided, the Tribunal or even the High Courts have no power to grant retrospectivity for a notification in the interpretation process

The High Court quashed the orders of the tribunal and restored the original orders confirmed in first appeals.