Late exercise of exemption option is ineffective from inception, so notification benefit cannot be claimed for the full year.

An exemption option under Notification No. 16/97-CE had to be exercised before the first clearance in the financial year. Because the option was exercised only after the first clearance, it was ineffective from inception and not a valid exercise of the notified choice. The assessee could therefore not claim the notification benefit for any part of 1997-98, and any benefit already taken had to be reversed. Duty for the relevant period was required to be computed outside the exemption scheme.

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Issues: (i) Whether the option under Notification No. 16/97-CE dated 01.04.1997 was validly exercised; (ii) if not, whether the assessee could still claim the benefit of the notification for the financial year 1997-98.

Issue (i): Whether the option under Notification No. 16/97-CE dated 01.04.1997 was validly exercised.

Analysis: The option under the notification had to be exercised before the first clearance in the financial year. The recorded facts showed that the option was exercised after the first clearance, so it did not satisfy the condition attached to the exemption scheme. The court treated the defect as one going to the existence of a valid option itself, not as a later withdrawal of an otherwise valid exercise.

Conclusion: The option was not validly exercised.

Issue (ii): If not, whether the assessee could still claim the benefit of the notification for the financial year 1997-98.

Analysis: Since the option was ineffective from inception, the assessee could not take advantage of the notification for any part of the financial year. Any benefit already obtained under the notification had to be reversed, and the clearances for the relevant period had to be governed outside the notification.

Conclusion: The assessee was not entitled to the notification benefit for the financial year 1997-98, and the earlier benefit was liable to be reversed.

Final Conclusion: The appeal succeeded only to the extent that the assessee's option was held invalid, but the consequence was that duty liability for the relevant period had to be worked out outside the exemption notification, with the department to compute the payable amount.

Ratio Decidendi: An exemption option that is exercised after the stipulated cutoff is ineffective from inception and cannot be treated as a valid option or as a case of withdrawal of a validly exercised option.

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