IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 9TH JUNE 2008 / 19TH JYAISHTA 1930 C.E.Appeal.No. 18 of 2006() --------------------------- (AGAINST FINAL ORDER NO.510/2006 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE DATED 02/03/2006) .................... APPELLANT/RESPONDENT: --------------------------- THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, COCHIN COMMISSIONERATE, C.R.BUILDING, I.S. PRESS ROAD, COCHIN-18. BY ADV. SRI.JOHN VARGHESE, ASSISTANT SG SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR RESPONDENTS/APPELLANT: ------------- M/S. MUSTANG RUBBERS INDUSTRIAL ESTATE, ETTUMANOOR, KOTTAYAM DISTRICT. BY ADV. SRI.JOSEPH KODIANTHARA SRI.MITHUN MARKOS THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 09/06/2008, ALONG WITH CEA NO. 19 OF 2006 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. ------------------------- C.E.A. Nos.18 & 19 of 2006 --------------------------------- Dated, this the 9th day of June, 2008 J U D G M E N T Ramachandran Nair, J. These connected appeals filed under Section 35(G) of the Central Excise Act are against the common order of the Customs, Excise & Service Tax Appellate Tribunal holding that respondents are entitled to benefit of Annexure-B notification issued by Government of India on 11/08/2003 retrospectively from 01/04/2003. 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-C.E issued on 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. The benefit of concession and exemption under Clause 2(vi) of this notification is available only if the aggregate value of clearances of all excisable goods for CEA Nos.18 & 19/2006 -2- 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. There is no dispute that the aggregate value of clearances of all excisable goods for home consumption includes value of goods manufactured and cleared on job work basis also. 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. However, the Government in exercise of powers conferred under Section 5A(1) of the Central Excise Act, issued Annexure-B Notification on 11/08/2003, whereunder Annexure-A, Notification No.9/03, is amended introducing Clause (e) to Clause 3A of Notification No.9/03. Clause 3A of Notification No.9/03 introducing clause (e) is extracted hereunder for easy reference. “3A. For the purposes of determining the aggregate value of clearances of all excisable goods for home consumption, mentioned in clause (vii) of paragraph 2 of this notification, the following clearances shall not be taken in to account namely:- (a) -------------- (b) -------------- (c) -------------- (d) -------------- CEA Nos.18 & 19/2006 -3- (e) clearances, which are exempt from the whole of the excise duty leviable thereon under notifications No.214/86- Central Excise, dated the 25th March, 1986 [G.S.R.547(E), dated the 25th March, 1986], or No.83/94-Central Excise, dated the 11th April, 1994 [G.S.R.375(E), dated the 11th April, 1994], or No.84/94-Central Excise, dated the 11th April, 1994 [G.S.R.376(E), dated the 11th April, 1994].” Notification No.214/86 referred to in the clause above provides for exemption of duty on goods cleared on job work basis. Consequent upon this amendment to Notification No.9/03, 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 both the respondents for the previous financial year, both the respondents are eligible for concession / exemption under Notification No.9/03. However, since the benefit accrued to respondents by Annexure-B Notification was issued on 11/08/2003, the Department granted the benefit only with effect from that date. Consequently, respondents are called upon to pay duty at normal rate for goods cleared up to 10/08/2003. Even though, the first appeal filed against the demand of duty was unsuccessful, respondents filed second appeal before the Tribunal. CEA Nos.18 & 19/2006 -4- The Tribunal allowed the appeal holding that Annexure-B Notification applies to the previous financial year also, even though the same was issued only on 11/08/2003. It is against this common order of the Tribunal, the Commissioner of Central Excise has filed these appeals. 2. We have heard Shri.P.Parameswaran Nair, Assistant Solicitor General, appearing for appellant and Shri. Joseph Kodiyathara, appearing for respondents. 3. Learned counsel appearing for appellant contends that 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. On the other hand, learned counsel for respondents contended that exemption is with reference to previous year’s turn over 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.9/03 and the basis of liability under the Notification though changed by Annexure-B Notification dated 11/08/2003, it applies from 01/04/2003 onwards. He has also referred to the decision of the Supreme Court in Mangalore Chemicals & CEA Nos.18 & 19/2006 -5- Fertilizers Ltd Vs. Deputy Commissioner, reported in 1991(55) ELT 437, whereunder the Supreme Court has held that notification granting exemption should be given wide and liberal construction. We are unable to agree with the finding of the Tribunal that prospectivity of notification has no relevance. In fact, the scope of a notification has to be considered with reference to the statutory provisions under which it is issued. It is the admitted position that without Annexure-B Notification, the respondents would not have been benefited by Annexure-A Notification providing for concession / exemption of duty. We find that Annexure-A Notification, No.9/03, and the notification amending it, namely Annexure-B Notification issued on 11/08/2003, were issued by the Government of India in exercise of powers conferred under Section 5A(1) of the Central Excise Act. Clause (5) to Sec.5A is as follows :- 5A (5) : “Every notification issued under sub-section (1) or (sub Sec.2(A)) shall- (a) unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette. (b) 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 CEA Nos.18 & 19/2006 -6- Revenue Act, 1963.” It is clear from the above clause that unless otherwise provided, notification issued under Section 5A(1) will come in to force on the date of it's issue. Since Annexure-B Notification amending Annexure-A Notification does not provide for retrospectivity, it comes into force on the date of issue, namely 11/08/03, as provided under Clause 5(a) to Section 5A of the Central Excise Act. In fact, this means that respondents are not entitled to benefit of amendment to Annexure-A Notification (No.9/03) up to 10/08/2003 and are liable to pay duty at normal rate for clearances made up to that date. However, by virtue of exclusion of job work turn over provided under Annexure-B Notification issued on 11/08/03, respondents will be entitled to benefit of amended Annexure-A Notification with effect from the date on which it was amended vide Annexure-B Notification. In other words, concession / exemption on clearances will be available to respondents only by virtue of Annexure-B Notification with effect from the date on which that notification came in to force i.e. 11/08/2003. We do not know on what basis, the Tribunal has held that prospectivity has no relevance in this case. The Tribunal, instead of considering the scope of notifications with reference to the statutory provisions, CEA Nos.18 & 19/2006 -7- under which those are issued, considered the scope of the statutory provisions with reference to the notifications issued. The Tribunal ought to have taken into account the powers of the Government, even to rescind Annexure-B Notification or to change the pattern of exemption available under Annexure-A as amended by Annexure-B Notification. The very purpose of Clause 5(a) to Section 5A is to cloth the Government with the power to grant benefit of any notification retrospectively wherever it is required or desirable. 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. We, therefore, allow the appeals by quashing the orders of the Tribunal and restoring the original orders confirmed in first appeals. (C.N.RAMACHANDRAN NAIR, JUDGE) (V.K.MOHANAN, JUDGE) jg