2012 (11) TMI 148 - AT - Central Excise

Cenvat credit SSI - respondents are manufacturing lay flat tubings and captively using the same for making plastic bags - alleged that applicable Notification No. 16/97, lay flat tubings are entitled to small scale exemption subject to the conditions specified thereunder whereas the plastic bags are fully exempt under Notification No. 4/97 subject to the condition that no credit of duty paid on the inputs is taken Held that - An amendment was made to the small scale exemption Notification on 3-12-97 introducing paragraph 5(f) which clarified that if the finished goods were exempt under any other notification (as in this case, the plastic bags were exempted under Notification No. 4/97), the inputs namely lay flat tubings cannot be deemed to be exempt under paragraph 3(c) - even though the authorities below have granted relief to the respondents applying the decision of the Hon ble Supreme Court in respect of unamended provisions of small scale exemption, there is no duty liability on the respondents once the amendment is given prospective effect from 3-12-97.

Summary

Issues: Interpretation of small scale exemption Notification No. 16/97 regarding captively consumed lay flat tubings and plastic bags, retrospective application of amendment made on 3-12-97, calculation of clearances for duty exemption.

In this judgment by the Appellate Tribunal CESTAT, Chennai, the issue revolved around the interpretation of Notification No. 16/97 concerning the exemption of captively consumed lay flat tubings and plastic bags. The department argued that lay flat tubings are entitled to small scale exemption, while plastic bags are fully exempt under different notifications. The tribunal noted that an amendment on 3-12-97 introduced paragraph 5(f) clarifying that if finished goods were exempt under another notification, the inputs could not be deemed exempt. Thus, clearances of lay flat tubings were required to be computed from 3-12-97 onwards.

The tribunal referred to a previous decision in the case of Gothi Thermoforming Industries, emphasizing that the amendment to Notification No. 16/97 could only have prospective effect from the date of the amendment, i.e., 3-12-97. Therefore, clearances of lay flat tubings captively consumed had to be counted for determining the first clearances entitled to full exemption and reduced rates thereafter. The tribunal found that only clearances made after the amendment date could be included in the calculation for duty exemption.

Ultimately, the tribunal concluded that once the amendment was given prospective effect from 3-12-97, the clearances made prior to this date could not be considered for calculating the aggregate value. Consequently, the tribunal held that there was no duty liability on the respondents, and the department's appeal was dismissed. The judgment highlighted the importance of interpreting notifications accurately and applying amendments prospectively in tax matters.