2000 (7) TMI 83 - SC - Central Excise

Whether assessee liable for claim of Notification No. 68/71-C.E. dated 29-5-1971? Held that - Unable to agree that the observation of the High Court in the instant case that the amendment which has been made which has the effect of defining the word rigid and flexible is not consistent with tariff item 15A which takes in within its ambit inter alia all types of categories of plastic sheets. Though both flexible and rigid plastic sheets are covered by tariff item 15A this categorisation of rigid and flexible has been done only with a view to provide exemption to flexible plastic sheets and not to rigid plastic sheets. By defining as to what would be regarded as flexible or rigid plastic sheets would not in any way amount to a conflict with tariff item 15A. Thus the High Court fell in error in quashing the notification of 1978. As a result of the aforesaid discussion we allow the appeal and set aside the judgment of the High Court. By order dated 6-4-1992 this court had permitted the respondent to claim refund subject to its furnishing guarantee and on its giving an undertaking that if the amount is ultimately found recoverable then the same shall be paid alongwith interest of 18% per annum.

Summary

Issues:
1. Interpretation of exemption notification for articles made of plastics under Tariff Item 15A
2. Validity of the explanation added to the exemption notification in 1978
3. Government's power to grant exemptions under Rule 8 of the Central Excise Rules

Analysis:

Issue 1: Interpretation of exemption notification for articles made of plastics under Tariff Item 15A
The case involved a dispute regarding the classification of plastic sheets manufactured by the respondent and their eligibility for exemption from excise duty under a 1971 notification. The respondent claimed total exemption based on the flexibility of the plastic sheets manufactured by them. However, a show cause notice was issued, and it was held that the sheets were liable to excise duty. The respondent challenged this decision through a writ petition, which was dismissed due to the availability of an alternative remedy by way of appeal. The Division Bench heard an appeal against this dismissal, during which a 1978 notification added an explanation defining "flexible" and "rigid" plastic articles. The High Court later quashed this amendment, stating it was inconsistent with the true meaning of the terms in Tariff Item 15A. The Supreme Court disagreed, emphasizing the government's discretionary power to grant exemptions and amend notifications to specify the scope of exemptions.

Issue 2: Validity of the explanation added to the exemption notification in 1978
The 1978 explanation added clarity to the 1971 exemption notification by defining "flexible" and "rigid" plastic articles. The High Court's decision to quash this amendment was deemed erroneous by the Supreme Court. The Court highlighted that the government has the authority to amend notifications to provide specific conditions for exemptions. The insertion of the explanation in 1978 was considered within the government's power to restrict the operation of the exemption notification. The Court emphasized that manufacturers do not have an inherent right to claim exemptions, and the government can impose conditions or limitations on exemptions as it deems fit.

Issue 3: Government's power to grant exemptions under Rule 8 of the Central Excise Rules
The Supreme Court reiterated that in matters of taxation, claiming an exemption is not a right but a discretion of the Central Government. Rule 8 empowers the government to grant exemptions subject to specified conditions. The Court upheld the government's authority to issue notifications amending earlier ones to define terms or restrict exemptions. The judgment allowed the appeal, setting aside the High Court's decision and making the respondent liable to refund any realized amount subject to interest if the duty was not paid within two months. The Court clarified the consequences of the appeal being allowed, emphasizing compliance with the duty payment requirements.

This detailed analysis of the judgment highlights the interpretation of the exemption notification, the validity of the added explanation, and the government's discretion in granting exemptions under Rule 8 of the Central Excise Rules.