Court rules against respondent on excise duty exemption, citing strict interpretation of fiscal laws

The court ruled against the respondent, holding that they could not avail the excise duty exemption under Notification No. 01/93-CE after opting out for another unit. The court emphasized strict interpretation of fiscal laws and exemption clauses, rejecting liberal construction arguments. The appeal was allowed, overturning the Customs, Excise & Service Tax Appellate Tribunal's decision.

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Issues: Whether a manufacturer, having opted to pay duty at the full rate in respect of one unit in a financial year under the amended exemption notification, could still claim exemption for another unit of the same legal entity under the same notification.

Analysis: The exemption scheme was framed to benefit small scale industries, but it operated on the basis of the manufacturer's aggregate value of clearances from one or more factories. The amendment permitting a manufacturer to opt out of exemption in a financial year was construed as applying to the manufacturer as a whole, not to individual units separately. Since the respondent was one legal entity operating two units, its decision to forgo the exemption for one unit meant that the aggregate position of the manufacturer had to govern the entitlement. The Court further held that exemption provisions, being in the nature of exceptions, must be strictly construed at the stage of determining eligibility.

Conclusion: The respondent could not claim exemption for the other unit after opting to pay full duty for one unit in the same financial year; the question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Where an exemption notification is drafted with reference to the manufacturer and the aggregate value of clearances from one or more factories, the option to forgo exemption in a financial year is to be applied to the manufacturer as a whole, and the exemption cannot be claimed unit-wise to split entitlement.

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