2017 (2) TMI 713 - AT - Central Excise

Tribunal exempts excise duty on Kerosene for PDS, upholds refund, cites Circular & Notification

The Tribunal ruled in favor of the appellant, holding that Kerosene meant for the Public Distribution System (PDS) was exempt from excise duty as per ... Exemption of PDS kerosene from excise duty - retrospective effect of curative/clarificatory notification - withdrawal of warehousing facility - public distribution system end use exemption - valuation of excisable goodsExemption of PDS kerosene from excise duty - retrospective effect of curative/clarificatory notification - public distribution system end use exemption - Refund of excise duty paid on kerosene cleared to IOCL for PDS for January 2005 and February 2005 was correctly allowed by the adjudicating authority. - HELD THAT: - The Tribunal found that the Government policy, as reflected in para 4 of Circular No.796/29/2004 CX dated 4.9.2004, was that kerosene meant for distribution under the Public Distribution System should not be subjected to excise duty. Although the warehousing facility was withdrawn by that circular, the underlying end use exemption policy continued. Notification No.4/2005 C.E. dated 1.3.2005 formally exempted PDS kerosene and embodied the same policy. The Tribunal applied the principle that a curative or clarificatory notification intended to mitigate hardship and to make plain an existing policy should be construed liberally and given retrospective effect to advance public welfare. Reliance on the Apex Court decision in W.P.I.L. Ltd. (as cited in the judgment) fortified the view that the subsequent notification clarified the earlier policy and operated retrospectively to cover clearances made during the interregnum. Consequently, levy of excise duty on PDS kerosene for January and February 2005 could not be sustained and the refund granted was upheld. [Paras 6, 7, 8]Appeal allowed; refund of duty on PDS kerosene for January 2005 and February 2005 upheld by reading Notification No.4/2005 C.E. as clarificatory and retrospective.Valuation of excisable goods - Whether the sale price adopted by IOCL for clearances should affect duty liability in the present appeals. - HELD THAT: - The Tribunal recorded that the factual matrix in Appeal No. E/547/2008 was similar to the earlier appeals but that, since duty liability on the PDS kerosene was held not to arise by reason of the exemption, any question regarding the appropriate valuation for duty determination became academic. The Tribunal therefore declined to express any opinion on valuation.Appeal allowed; duty liability does not arise and valuation issue left undecided as academic.Final Conclusion: The Tribunal allowed the appeals: it held that Notification No.4/2005 C.E. dated 1.3.2005 operated as a clarificatory, retrospectively effective instrument to exempt PDS kerosene from excise duty (covering January and February 2005), and, accordingly, maintained the refund; a related valuation issue was left undecided as academic since no duty liability arose. Issues:1. Interpretation of Circular No.796/29/2004-CX and Notification No.4/2005-CE regarding exemption of excise duty on Kerosene meant for Public Distribution System (PDS).2. Validity of refund granted to the appellant for duty paid on Kerosene cleared during January and February 2005.3. Retroactive application of Notification No.4/2005-CE dated 1.3.2005.4. Application of the decision in W.P.I.L Ltd. Vs Commissioner - 2005 (181) ELT 359 (SC) on the retrospective effect of clarificatory notifications.Analysis:1. The appellant argued that Kerosene meant for PDS should not be subject to excise duty, citing Circular No.796/29/2004-CX and Notification No.4/2005-CE. The Circular indicated the intention of the Government to exempt PDS Kerosene from duty. The Tribunal noted the withdrawal of the warehousing system in 2004, but the policy remained consistent, leading to the issuance of the notification in 2005, exempting PDS Kerosene from duty.2. The appellant was initially subjected to duty for Kerosene cleared in January and February 2005. However, upon the issuance of Notification No.4/2005-CE, the adjudicating authority granted a refund of the duty paid. The Revenue appealed against this refund, leading to the Tribunal's consideration of the matter.3. The Tribunal emphasized the importance of interpreting curative notifications liberally and retrospectively to advance public welfare. It held that the delayed issuance of Notification No.4/2005-CE did not negate its purpose to exempt PDS Kerosene from duty. The Tribunal found the order of the Commissioner unsustainable and allowed the appeal in favor of the appellant.4. In citing the decision in W.P.I.L Ltd. Vs Commissioner, the Tribunal highlighted the retrospective effect of clarificatory notifications that clarify previous government policies. The Tribunal found that the notification in this case clarified the policy expressed in the Circular, further supporting its decision to allow the appeal and uphold the refund granted to the appellant.In a separate appeal, the Tribunal allowed the appeal without expressing an opinion on the valuation issue raised by the Revenue, as the appellant's duty liability did not arise based on the circumstances presented.