Judgment
1. The issue involved in this appeal filed by M/s. Komal Straw Board & Mill Board Industries, is whether the benefit of Notification No.22/94, amended by Notification No. 22/95, is available to the goods manufactured by them.2. Shri Ajay Jain, learned Advocate, submitted that the appellants manufactured paper and paper board as a small scale unit; that they are eligible to the benefit of Notification No. 1/93-C.E. dated 28-2-1993, being small scale unit and they are also eligible to the benefit of exemption under Notification No. 22/94-C.E. dated 1-3-1994 as they fulfilled all the conditions stipulated therein; that for the financial year, 1994-95, they filed the classification list under Rule 173B of the Central Excise Rules, 1944 and availed exemption under Notification No. 1/93; that after exceeding slab of Rs. 30 lakh, they switched over to the Notification No. 22/94 from 22-7-1994. He, further, mentioned that Notification No. 22/94 was amended by Notification No. 22/95-C.E.dated 16-3-1995 by which a restriction was imposed that a manufacturer of goods cannot, simultaneously, avail the benefit of both the Notifications i.e. 1/93 and 22/94; that the Revenue has confirmed the demand of duty and imposed penalties, demanding interest on the ground that w.e.f. 16-3-1995, after Notification No. 22/94 was amended, they were not eligible to get, the exemption under Notification No. 22/94; that the issue has been decided in favour of the appellants in the case of Aruna Straw Boards (P) Ltd. v C.C.E., Hyderabad, wherein it has been held by the Tribunal that the amending Notification No. 22/95 will have only prospective effect and the proviso inserted by it cannot be applied retrospectively; that the Tribunal has also held that there was no bar in Notification No. 22/94 for availing the benefit of Notification No. 1/93 and, therefore, the appellants, therein having availed of the benefit after crossing the clearance figure is correct one. The learned Advocate also contended that as amending Notification has been issued only on 16-3-1995, the reference to April in the Notification will have to be treated as a reference to April, 1995 and not April, 1994; that otherwise, the Notification is being given retrospective effect without being specified in the Notification; that had the Government of India any intention to impose such a condition for the financial year 1994-95 the restriction would have been imposed in the Budget for the year 1994-95 itself or any time during the said period; that when the amendment to Notification No.22/94 has been made in the budget for the financial year 1995-96, it is clear, that the Government of India intended to impose the condition only for the financial year 1995-96 onwards. Finally, the learned Advocate submitted that as the issue involves interpretation of Notification, the question of imposing any penalty on them does not arise; that they are also not liable to pay interest as the duty relates to the period from 16-3-1995 to 31-3-1995 when the interest provisions were not in existence in the statute book.
2. Countering the arguments Shri P.K. Ray, learned D.R., submitted that amending notification inserted a proviso to Notification No. 22/95 providing therein that exemption is not applicable to a factory on or after the 1st April in any financial year and the exemption under Notification No. 1/93 was availed of during the course of such financial year; that it is apparent from the amendment carried out in the Notification that if a manufacturer has availed of exemption under Notification No. 1/93 during the same financial year, the benefit of Notification No. 22/94 will not be available to the goods manufactured by them; that as the appellants have admittedly availed of the benefit of Notification No. 1/93 during the financial year 1994-95, they are not eligible for the benefit of Notification No. 22/94 after its amendment w.e.f. 16-3-1995.
3. He also contended that the amending notification is not being given retrospective effect as the benefit of notification is only denied for the clearances of the goods effected by them w.e.f. 16-3-1995 and not in respect of clearances effected prior to 16-3-1995. Finally, he mentioned that the interest is payable by the appellants under Section 11AA of the Central Excise Act as when the demand was confirmed, the interest provision has been brought into effect.
4. We have considered the submissions of both the sides. Notification No. 1/93-C.E. provides exemption from payment of duty upto a specified limit to a unit which is registered as a small scale unit. Notification No. 22/94-C.E., dated 1-3-1994 provides exemption to paper and paper board or articles made therefrom subject to the conditions specified in the Notification to the effect that the goods have been manufactured starting from the stage of pulp in a factory and such pulp contains not less 75% by weight of pulp made from materials other than bamboo, hard woods, soft woods, reeds or rags. Notification No. 22/94 was amended by Notification No. 22/95 dated 16-3-1995 which inserted the following proviso in the Notification : "Provided that the exemption contained in this notification shall not apply to clearances made from a factory on or after the 1st day of April in any financial year if the exemption under the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 1/93-C.E., dated the 28th February, 1993 is availed of by the manufacturer of the said goods during the course of such financial year." 5. The effect of insertion of the proviso by Notification No. 22/95 is that the exemption contained in Notification No. 22/94 will not be available to clearances made from a factory on or after 1st day of April in any financial year if the exemption under Notification No.1/93 is availed of by the manufacturer during the course of such financial year. It is not in dispute that the appellants had availed of the benefit of exemption contained in Notification No. 1/93 during 1994 upto the beginning of July, 1994. Thus, they had availed of the benefit of Notification No. 1/93 during the course of financial year 1994-95.
Once they have availed of the benefit of Notification No. 1/93, they have been barred from availing the benefit of Notification No. 22/94 after its amendment w.e.f. 16-3-1995. We, therefore, find no reason to interfere with the findings contained in the impugned Order or as far as the denial of the benefit of Notification No. 22/94, as amended, is concerned in respect of the clearances effected during the period from 16-3-1995 to 31-3-1995. The learned D.R. has rightly urged that the amending Notification has not been given retrospective effect as no duty has been demanded by disallowing the benefit of Notification No.22/94 for the period prior to 16-3-1995. The Tribunal in the case of Aruna Straw Boards (P) Ltd. v C.C.E., Hyderabad, (supra) also has held that the proviso cannot be applied retrospectively. In our view, in the present matter, the proviso inserted in the Notification No. 22/95, has not been applied retrospectively. We, therefore, uphold the demand of duty. We, however, agree with the learned Advocate that it is not the case where any penalty is imposable as the issue involved was purely of interpretation of the Notification. Accordingly we set aside the penalty imposed on them. The interest is also not imposable as the provisions of Section 11AA of the Central Act came into effect only from 26-5-1995. We therefore, set aside the demand of interest. The appeal is disposed of in these terms. (Operative part of order pronounced in open Court on 21-2-2005).