Exempt clearance computation under Notification No. 1/93 must exclude earlier fully exempt goods, despite Modvat credit on inputs.

Writ jurisdiction was held maintainable despite an alternative appeal, because the dispute turned on interpretation of exemption notifications and an Article 14 challenge, not on disputed facts. For computing the aggregate clearances under Notification No. 1/93, clearances of final products already fully exempt under an earlier notification were to be excluded, even though Modvat credit had been taken on inputs, because the goods retained their exempt character and the notification scheme was intended to support small-scale units. The Article 14 challenge failed, as the differential treatment arose from misapplication of the notification rather than from its text. The adjudication orders were quashed and the matter remanded for recomputation and fresh decision on entitlement.

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Issues: (i) Whether the writ petitions were maintainable despite the availability of an alternative statutory remedy of appeal; (ii) whether, while computing the aggregate value of clearances under Notification No. 1/93, clearances of final products in respect of which Modvat credit had been taken under the earlier exemption regime were to be excluded; (iii) whether Notification No. 1/93 and the consequential departmental order were violative of Article 14 of the Constitution of India.

Issue (i): Whether the writ petitions were maintainable despite the availability of an alternative statutory remedy of appeal

Analysis: The existence of a statutory appeal under the Central Excises and Salt Act, 1944 was held not to be an absolute bar to the exercise of jurisdiction under Article 226 of the Constitution of India. The petitions involved interpretation of exemption notifications and a constitutional challenge under Article 14, matters beyond the competence of the appellate authority. The petitions had also been heard in full and did not raise disputed questions of fact requiring relegation to the alternative forum.

Conclusion: The objection based on alternative remedy was rejected, and the writ petitions were held maintainable.

Issue (ii): Whether, while computing the aggregate value of clearances under Notification No. 1/93, clearances of final products in respect of which Modvat credit had been taken under the earlier exemption regime were to be excluded

Analysis: Notification No. 1/93 excluded from computation clearances of goods exempted from the whole of excise duty under another notification issued under Rule 8(1) of the Central Excise Rules, 1944 or Section 5A of the Central Excise Act. The earlier Notification No. 202/88 granted total exemption to the relevant final products, and the alleged bar arising from non-availment of the second proviso was treated as not defeating the substantive character of the goods as exempted goods. The reasoning also emphasized that the scheme was meant to extend incentive to small-scale units and that differential treatment between exemption and Modvat users, absent a legally relevant distinction, would frustrate the object of the notification.

Conclusion: The clearances of such goods were directed to be excluded while computing the aggregate value under Notification No. 1/93, and the benefit of the notification was held applicable to the petitioners.

Issue (iii): Whether Notification No. 1/93 and the consequential departmental order were violative of Article 14 of the Constitution of India

Analysis: The Court held that the notification did not create two different standards for similarly situated manufacturers. The apparent differential treatment arose from an erroneous interpretation of the notification, not from the language of the notification itself. Since the petitioners were entitled to have the exempted clearances excluded in computing the threshold, no unconstitutional discrimination was established. The departmental order restricting the benefit to re-rollers availing only the later exemption was therefore unsustainable to the extent it excluded the petitioners.

Conclusion: The challenge under Article 14 failed, but the impugned adjudication orders were quashed and the relevant clearances were directed to be recomputed in accordance with the judgment.

Final Conclusion: The petitions succeeded in substance, and the petitioners were held entitled to consideration of the exemption under Notification No. 1/93 after exclusion of the relevant clearances, with the adjudication orders set aside and the matter sent back for recomputation and fresh decision on entitlement.

Ratio Decidendi: Where exempted goods are cleared under an earlier exemption notification, their value is to be excluded for computing the threshold under a later exemption notification even if Modvat credit was taken in relation to the inputs, unless the statute clearly mandates a different treatment.

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