2015 (4) TMI 74 - SC - Central Excise

Supreme Court quashes duty demands, allows appeals on compounded rubber exemption, orders retrospective refund

The Supreme Court allowed the appeals, quashing duty demands imposed by the Commissioner of Central Excise against the appellants. The Court held that the ... Denial of exemption claim - compounded rubber - demand of duty on Captive consumption during the transitional period - Notification granting exemption was rescinded for a period of few days - Held that:- Compounded rubber was also rescinded by the same Notification dated 1.3.94 and reintroduced in the same manner vide another Notification issued on 28.3.1994, ratio of W.P.I.L . Ltd. case [2005 (2) TMI 137 - SUPREME COURT OF INDIA] shall squarely apply to the present case as well. As a result, only on this ground, these appeals are allowed and the demand raised against the appellants is quashed. - By an interim order passed in this case the respondents were called upon to make deposit of ₹ 22 lakhs, 24 lakhs and 22 lakhs respectively, with the excise Department. The aforesaid amount shall be refunded to the appellants within a period of three months - Decided in favour of assessee. Issues:1. Whether the duty demand imposed by the Commissioner of Central Excise is valid.2. Whether the exemption on compounded rubber was withdrawn and reintroduced through notifications.3. Whether the exemption should be applied retrospectively.4. Whether duty is payable on compounded rubber meant for captive consumption.5. Application of legal precedent from a similar case regarding exemption notifications.Detailed Analysis:1. The appeals arose from a common order passed by the Customs Excise & Service Tax Appellate Tribunal, New Delhi, upholding duty demands imposed by the Commissioner of Central Excise against the appellants. The dispute pertained to the manufacture of compounded rubber used in the production of bicycle and cycle rickshaw tires and tubes, which was initially exempt from excise duty but later had its exemption rescinded and then reintroduced through subsequent notifications.2. The Government rescinded multiple notifications, including the one exempting compounded rubber, through Notification No.64/94-CE dated 1.3.1994. However, shortly after, Notification No.74/94-CE dated 28.3.1994 was issued, reinstating the exemption on compounded rubber. The contention was raised that the exemption should be considered continuous and retrospective, covering the period from 1.3.94 to 27.3.94, during which duty was not paid on the cleared compounded rubber.3. The appellants argued that the withdrawal of the exemption on compounded rubber was an error rectified by the subsequent notification, which should be treated as clarificatory and applied retrospectively. This argument was supported by a legal precedent where a similar situation regarding exemption notifications for power-driven pumps was resolved in favor of the appellants, allowing the exemption to apply even during the period without the explicit notification.4. The second defense raised by the appellants was that the compounded rubber meant for captive consumption was not marketable, and therefore, no duty should be payable on it. However, the Commissioner and the Tribunal rejected both defenses and confirmed the duty demands, leading to the appeals before the Supreme Court.5. Drawing from the legal precedent set in a previous case involving power-driven pumps, the Supreme Court allowed the appeals based on the first defense raised by the appellants. The Court held that since the exemption on compounded rubber was rescinded and reintroduced through subsequent notifications, the exemption should be considered continuous, and duty demand against the appellants was quashed. The Court ordered the refund of the amounts deposited by the appellants with the excise department within three months.