Important point
Clarificatory notification granting exemption from duty would take effect retrospectively.

Judgment

Thakker, J.—These appeals have been filed by the appellant against an Order in Original Nos. 123-29 of 1996 passed by the Assistant Commissioner, Central Excise, Division I, Ghaziabad, confirmed by the Commissioner (Appeals), Customs & Central Excise, Ghaziabad and also confirmed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (‘CEGAT’ for short).

2. The case of the appellant is that it is the manufacturer of power driven pumps and parts thereof designed for handling water. The power driven pumps as well as parts thereof which are used for manufacture of pumps have been exempted from levy of excise duty since 1978. Various notifications had been issued from time to time granting exemption to both, i.e. power driven pumps and also parts of power driven pumps which were used in the manufacture of the power driven pumps. Parts of power driven pumps which were not utilized for manufacture of power driven pumps within the factory were, however, outside the purview of exemption and they were subjected to levy of excise duty.

3. According to the appellant, with a view to reducing special exemption notifications and consolidating various exemption notifications in 1994, the Government rescinded 389 notifications with effect from March 1, 1994 and re-issued a consolidated notification incorporating earlier notifications vide Notification No. 46/94 dated March 1, 1994. In the said notification, power driven pumps were shown as an exempted item. Due to inadvertence, however, parts of power driven pumps used in manufacture of pumps within the factory which were all along exempted from 1978 were omitted. But there was no change in the Government policy in 1994 which was in vogue since 1978. The omission was, therefore, brought to the notice of the Government by the industries. The Government was also satisfied and amended the notification No. 46/94 dated March 1, 1994 by issuing another notification No. 95/94 on April 25, 1994 correcting the mistake and clarifying the position that parts of power driven pumps which were used in manufacture of power driven pumps would also be exempted. According to the appellant, the notification No. 95/94 dated April 25, 1994 was thus merely clarificatory in nature and an obvious error or omission which remained while issuing notification No 46/94 on March 1, 1994 was rectified by the subsequent notification No. 95/94 on April 25, 1994 and hence it was retrospective in operation. The resultant effect, according to the appellant, was that parts of power driven pumps which were to be utilized for manufacturing power driven pumps within the factory would continue to be exempted from payment of excise duty.

4. Unfortunately, however, show cause notices were issued by the Assistant Collector, Central Excise, Division 1, Ghaziabad on October 3, 1994 and October 24, 1994 alleging therein that the appellant had cleared the parts of power driven pumps for use within the factory for the manufacture of submersible power driven pumps during the period between 1st March, 1994 and 21st April, 1994 without payment of duty which was subjected to central excise duty. The said item was exempted with effect from April 25, 1994 and the appellant was, therefore, liable to pay excise duty for the intervening period, i.e. 1st March, 1994 and 21st April, 1994.

5. The appellant submitted a reply on October 31, 1994 inter alia contending that it was not liable to pay excise duty. No suppression of facts or mis-declaration was alleged against the appellant and the demand was barred by limitation. It was also stated that notification No. 95/94 dated April 25, 1994 was retrospective in nature and exemption ought to be considered and granted from March 1, 1994. There was, therefore, no liability on the part of the appellant to pay any amount.

6. The Assistant Commissioner, Central Excise, Division I, Ghaziabad, by an order dated March 31, 1996 confirmed the demand against the appellant and directed it to pay