Prakash Security Devices (India) vs Union of India (UOI)

R.M. Sahai, J.—The petitioner, a partnership firm engaged in assembling and making a device for sounding alarm, registered as small scale industries, thus entitled to exemption from payment of excise duty under Central Excises and Salt Act, 1944 and obtaining of any licence under Rule 174 (licensing) of Central Excise Rules, 1944 is aggrieved by order of the Assistant Collector, Central Excise levying penalty under Rule 210 and determining duty under the Act.

Although the finding recorded by the Assistant Collector that fire alarms manufactured by the petitioner falling under Tariff Item 68 of the erstwhile Central Excise Tariff and now under heading No. 8531.00 of Central Excise Tariff Act, 1985 were goods, was challenged as the finding was recorded without affording any opportunity in proceedings initiated for non-obtaining of licence but it is not necessary to decide it as the order is liable to be set aside on the legal issue that the goods were exempt from any duty in material period namely from 1st April, 1985 to 28th February, 1986 and then from 1st March, 1986 to 24th March, 1986 from payment of duty under notifications issued by opposite parties from time to time. It is not disputed that the petitioner was registered as small scale unit and a small scale industry was entitled to exemption from duty if its clearance did not exceed Rs. 20 lacs under Notification No. 77 of 85, dated 1st March, 1985. It is further not disputed that the clearance of the petitioner did not exceed Rs. 20 lacs in the relevant period. But the show cause notice appears to have been issued under Rule 174 for not obtaining licence as under Notification No. 2/81, dated 17th January, 1981 no exemption was provided from obtaining licence if the aggregate value of goods cleared for home consumption during the financial year exceeded or was estimated to exceed 80% of the exemption limit. Correctness of this view again is not necessary to be adjudicated upon nor it is necessary to decide if the petitioner had requested for grant of licence if it was within time and effect of its grant in 1987 as the principal controversy namely, eligibility to duty appears to have been erroneously decided. As stated earlier clearances upto Rs. 20 lacs were exempt under Notification No. 77 of 85. On 1st March Notification No. 175/86 was issued reducing exemption limit to Rs. 7.5 lacs only. But this limit was restored to Rs. 20 lacs again on 25th March, 1986 by Notification No. 213/86. The question is whether clearances from 1st March to 24th March made by the petitioner which admittedly was beyond Rs. 7.5 lacs but below 20 lacs was eligible to duty or not. Reliance has been placed on Notification No. 202 of 1986 issued on same day namely, 25th March, 1986 which envisaged that Notification No. 175 of 1986 was not applicable from 25th March to 31st March. Therefore, it was urged by the learned Standing Counsel for Union of India that this left no room for doubt that the Notification No. 213 of 1986 applied prospectively and clearances between 1st March, 1986 to 24th March, 1986 were eligible to duty under Notification No. 175/86 and since it was more than Rs. 7.5 lacs the petitioner was liable to pay duty. Notification No. 213 of 1986 reads as under :-

"In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules 1944, the Central Government hereby exempts excisable goods (other than sandal wood oil) falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) hereinafter referred to as the Central Excise Tariff Act) and which were falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act) as it existed immediately before the commencement of the Central Excise Tariff Act (hereinafter referred to as the "said goods"), and cleared for home consumption on or after the 1st day of April, 1985 and upto and inclusive of 31st day of March 1986, by or on behalf of a manufacturer from one or more factories,

(i) in the case of the first clearances of the said goods upto an aggregate value not exceeding rupees twenty lacs, from the whole of the duty of excise leviable thereon u/s 3 of the Central Excises Act;"

Although this notification was issued on 25th March, 1986 but it having allowed exemption to clearances upto Rs. 20 lacs between 1st day of April, 1985 to 31st March, 1986 it applied retrospectively and results in rescinding of Notification No. 175/85 to the extent it was in conflict with it. Therefore, exemption was available to the petitioner on its clearance upto Rs. 20 lacs between 1st March, 1986 to 24th March, 1986 irrespective of Notification No. 175/86. The restrictive meaning given to the notification because of Notification No. 202 of 1986 being contrary to explicit words used in the notification has to be rejected.

In the circumstances this petition succeeds and is allowed. The order of the Assistant Collector dated 29th April, 1988 is quashed. He is directed to decide the matter afresh in the light of what has been stated above. Other disputes shall be open to the petitioner to be raised before him. There shall be no order as to costs.