Small scale exemption under Notification No. 1/93-C.E. applies from the later eligibility date, not the financial year start.

For small scale exemption under Notification No. 1/93-C.E., the clearance value was not to be computed from 1-4-1994 because the goods were not specified goods on that date. The goods became specified on 25-4-1994, while Modvat eligibility arose only on 20-5-1994 after deletion of Rule 56A. The majority view applied the later Larger Bench approach and treated the exemption as available from the legally effective date when the goods entered the notification and the assessee opted for exemption, so clearances had to be computed from that point rather than from the start of the financial year.

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Issues: Whether the value of clearances for availing small scale exemption under Notification No. 1/93-C.E. should be computed from 1-4-1994, from the date the goods were specified, or from the date the assessee opted for the exemption when the goods became eligible for Modvat only on 20-5-1994.

Analysis: The majority applied the earlier and later Larger Bench decisions to hold that the relevant computation could not begin from 1-4-1994 because the goods were not specified goods on that date. The goods became specified on 25-4-1994 and Modvat was extended only on 20-5-1994 after deletion of Rule 56A. The majority followed the view that, in such circumstances, the exemption becomes available from the date the goods are brought within the notification and the assessee can claim it from the date of opting for the exemption, with clearances to be computed accordingly. The dissenting view preferred computation from 25-4-1994.

Conclusion: The benefit of Notification No. 1/93-C.E. was held to be available from 20-5-1994, and the clearances were to be computed from the date on which the assessees opted for the exemption in 1994-95.

Final Conclusion: The dispute was resolved in favour of the assessees by accepting the later eligible date for the exemption and rejecting computation from 1-4-1994.

Ratio Decidendi: Where goods are brought within a small scale exemption notification only from a later date and Modvat eligibility also commences later, the exemption and the clearance slab are to be applied from the legally effective date of eligibility, not from the start of the financial year.

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