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TMI Blog2024 (12) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... final products inspite of the exemption Notification being issued by the Central Government, the same was claimed as Modvat/Cenvat credit resulting into revenue neutralization - the appellant once having paid the duty is bound to get the Modvat/Cenvat credit but, for the insertion of Clause 1A by the Finance Act, 2005 which specifically declares that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods. Thus, after the insertion the appellant-assessee was prohibited from payment of excise duty on the exempted excisable goods and therefore, there is no question of getting any Modvat/Cenvat credit in view of such prohibition. Whether the amendment to Section 5A by inserting sub-section 1A is clarificatory or prospective in nature? - HELD THAT:- The insertion of Section 1A cannot be said to be clarificatory but, it is substantive in nature as it prohibits the assesseee from payment of duty on the exempted excisable goods. The Hon ble Apex Court in case of Commissioner of Central Excise, Pune Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section 1A as is clarificatory nature or in prospective? 2. The appellant-Company was a manufacturer of Anesthetic products which are fully and unconditionally exempted from payment of excise duty during the relevant period from 1st March, 2000 to 14th August, 2003. The appellant however, chose to pay the duty on such unconditional exempted goods which were being cleared partly in the domestic market and partly for export. The appellant therefore, made a claim for benefit of credit of duty on the raw materials which were paid on the exempted goods and which was passed on to the customers in respect of the sale in domestic market and so far as the duty paid in respect of the goods which were exported, the claim was made for the benefit of rebate. 3. A show cause notice was issued pursuant to the search conducted at the premises of the appellant on 14th August, 2003 calling upon the appellant to show cause as to why the amount of Rs. 40,81,632/- being the MODVAT/CENVAT credit availed on the raw materials used in the manufacture of exempted final product i.e. Anesthetic Products should not be disallowed and recovered under Rule 57 I of Central Excise Rules, 1944 as substituted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of option holding that sub-Section (1A) of Section 5A inserted by the Finance Act. 2005 is clarificatory in nature and therefore, the Notification ought to have been adhered to by the appellant as per the provision of Section 5A (1A) of the Act. 8. The appellant thereafter, preferred an application for rectification of mistakes before the CESTAT pointing out that the Hon ble Apex Court in case of Commissioner of Central Excise and Customs (A), Ahmedabad Vs. Narayan Polyplast reported in 2005 (179) ELT 20 (SC) wherein, the question whether the assessee was bound to avail exemption or can forego the same in order to avail MODVAT credit was considered and it was decided in favour of the assessee holding that it would have no revenue implications. However, the Tribunal by order dated 25.05.2007, dismissed the application for rectification of mistakes on the ground that the order of the Tribunal was passed after taking into consideration the change in law made subsequent to the judgement of the Hon ble Apex Court. 9. The appellant thereafter has preferred this appeal which was admitted on the aforesaid substantial questions of law. 10. Learned advocate Mr. Hardik Modh appearing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that non-availing of exemption under the Exemption Notification No .53/88 dated 1st March, 1988 was optional and the assessee was not bound to avail the exemption or can forego the same in order to avail the Modvat credit as the issue is merely technical and there was no revenue implication. 10.3 Reliance was also placed on the decision of the Hon ble Apex Court in case of Union of India Vs. Martin Lottery Agencies Ltd. reported in 2009 (14) STR 594 (SC) in support of the contention that while considering the applicability of an amendment retroactive or prospective, the Court must be satisfied that the Parliament did not intend to introduce a substantive change in the law in the expressions like `for the removal of doubts' are not conclusive. 11. On the other-hand learned advocate Mr. Utkarsh Sharma for the respondent relied upon the order passed by the Tribunal and submitted that the Tribunal has rightly held that the exemption Notification is mandatory upon the appellant as the excise duty is in indirect tax and ultimate tax bearer is a consumer. It was therefore, submitted that as the final product of the appellant are exempted, the appellant was not entitled to the Modvat/C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral 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 : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured - (i) in a free trade zone or a special economic zone and brought to any other place in India; or (ii) by a hundred per cent export-oriented undertaking and [brought to any place in India]. Explanation . - In this proviso, free trade zone , special economic zone and hundred per cent export-oriented undertaking shall have the same meanings as in Explanation 2 to sub-section (1) of section 3. [(1A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, it is substantive in nature as it prohibits the assesseee from payment of duty on the exempted excisable goods. The Hon ble Apex Court in case of Commissioner of Central Excise, Pune Versus Pudumjee Pulp Paper Mills Ltd. (Supra) observed as und. 4. Counsel for the Revenue relying upon Clause (1A) of Section 5A of the Central Excise Act, 1944, which reads as under: 5A. Power to grant exemption from duty of excise. xxxxx xxxxxx xxxxx (1A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods. submits that the relief prayed by the assessee cannot be granted. We find from the foot note that Clause (1A) of Section 5A of the Act was introduced by Act No. 18/2005 with effect from 13th May, 2005. Counsel contends that Clause (1A) being clarificatory in nature would be retrospective in operation. Prima facie, in view of the fact that Clause (1A) came into effect w.e.f. 13th May, 2005, we do not find any substance in the submission that Clause (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in cases where for avoidance of doubt , something is clarified by way of an amendment, such clarification cannot have retrospective effect, if the earlier law has been changed substantially. 19. From the above conspectus of law, it is clear that when the amendment changes the law it cannot be presumed to be retrospective, irrespective of the fact that the phrase used are it is declared or for the removal of the doubts . Similarly in case of Union of India Vs. Martin Lottery Agencies Ltd. reported in 2009 (14) STR 593 (SC) in the facts of the said case held as under :- 31. The question as to whether a Subordinate Legislation or a Parliamentary Statute would be held to be clarificatory or declaratory or not would indisputably depend upon the nature thereof as also the object it seeks to achieve. What we intend to say is that if two views are not possible, resort to clarification and/or declaration may not be permissible. This aspect of the matter has been considered by this Court in Virtual Soft Systems Ltd. v. Commissioner of Income Tax, Delhi-I [(2007) 9 SCC 665], holding : It may be noted that the amendment made to Section 271 by the Finance Act, 2002 only stated that the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not the end of the matter. The Court will not regard itself as being bound by the said statement in the statute itself, but will proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is an amendment which is intended to change the law and which applies to future periods. This position of the law has also been subscribed to in Union of India vs. Martin Lottery Agencies Ltd., (2009) 12 SCC 209 wherein it was stated that when a new concept of tax is introduced so as to widen the net, the same cannot be said to be only clarificatory or declaratory and therefore be made applicable retrospectively, even though such a tax was introduced by way of an explanation to an existing provision. It was further held that even though an explanation begins with the expression for removal of doubts, so long as there was no vagueness or ambiguity in the law prior to introduction of the explanation, the explanation could not be applied retrospectively by stating that it was only clarificatory. 9.2 From the aforesaid authorities, the following principles could be culled out: i) If a statute is curative or mere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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