Exemption by notification and finality of assessment: later administrative review cannot convert an unconditional approval into provisional assessment.

Later communications could not convert an earlier unconditional approval of classification lists into a provisional assessment under Rule 9B, because the approval had been completed without reservation and the rules did not confer a power of review. The administrative demand for a bond was therefore unsustainable. On exemption, fibre and tops made from duty-paid waste remained covered by Notification No. 37/78-C.E. where MEG was used only as an assisting agent, because the notification required manufacture out of duty-paid waste and did not impose an exclusivity restriction later found in a subsequent notification. The exemption claim for the relevant period was accordingly maintained.

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Issues: (i) Whether the excise authorities could, by later communications, treat an earlier unconditional approval of the classification lists as provisional and require a bond under Rule 9B of the Central Excise Rules, 1944. (ii) Whether fibre/tops manufactured out of duty-paid waste with MEG used only as an assisting agent remained entitled to exemption under Notification No. 37/78-C.E. dated 1-3-1978.

Issue (i): Whether the excise authorities could, by later communications, treat an earlier unconditional approval of the classification lists as provisional and require a bond under Rule 9B of the Central Excise Rules, 1944.

Analysis: The earlier classification lists had been approved without any indication that the approval was provisional, and the relevant portions relating to provisional assessment had been struck off. Rule 9B permits provisional assessment only where the proper officer invokes that mechanism in the circumstances contemplated by the rule. The later communications did not amount to a fresh assessment exercise but in substance attempted to convert a final approval into a provisional one. As the Central Excises and Salt Act, 1944 and the rules did not confer any power of review, the authorities could not revisit the completed approval in this manner.

Conclusion: The later communications treating the approval as provisional and the bond demand were without authority and could not stand.

Issue (ii): Whether fibre/tops manufactured out of duty-paid waste with MEG used only as an assisting agent remained entitled to exemption under Notification No. 37/78-C.E. dated 1-3-1978.

Analysis: The exemption notification required only that the fibres and tops be manufactured out of wastes on which appropriate duty had already been paid. It did not require exclusive use of waste or prohibit the use of any assisting material. The later notification of 24-4-1980 used materially different language by adding requirements such as exclusive manufacture from waste and processes not involving recycling, which showed that those limitations were not present in the earlier notification. The exemption had therefore to be judged by the plain language of Notification No. 37/78-C.E., not by any supposed intended restriction.

Conclusion: The petitioners remained entitled to the exemption under Notification No. 37/78-C.E. for the relevant period.

Final Conclusion: The impugned communications were unsustainable, the exemption claim succeeded for the period covered by the earlier notification, and the writ petition was allowed with consequential cancellation of the bank guarantee.

Ratio Decidendi: A taxing exemption must be determined strictly by the language of the notification, and an administrative authority cannot, in the absence of statutory power, convert a final approval into a provisional one by an act of review.

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