Clarificatory exemption notifications operate retrospectively when they merely make explicit an existing excise exemption scheme.

A clarificatory exemption notification was held to operate retrospectively where earlier notifications showed a consistent policy of exempting power driven pumps and parts used within the factory for manufacture of pumps. The 1-3-1994 change was treated as a consolidation exercise that did not withdraw the existing exemption scheme. Notification No. 95/94 therefore merely made explicit what was already implicit, so excise duty could not be demanded for the intervening period. The duty demand was set aside and the amount deposited was directed to be refunded.

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Issues: Whether Notification No. 95/94 dated 25-4-1994 was clarificatory and retrospective, with the result that parts of power driven pumps used within the factory for manufacture of pumps remained exempt from excise duty during the intervening period after Notification No. 46/94 dated 1-3-1994.

Analysis: The earlier notifications showed a consistent policy of exempting power driven pumps and parts used within the factory for manufacture of pumps. The change made on 1-3-1994 was only a consolidation exercise rescinding multiple notifications, not a withdrawal of the existing exemption policy. Notification No. 95/94 dated 25-4-1994 merely clarified and made explicit what was already implicit in the exemption scheme, and such a clarificatory notification operates retrospectively.

Conclusion: The demand of excise duty for the intervening period was unsustainable and the issue was answered in favour of the assessee.

Final Conclusion: The appeals succeeded, the duty demand was set aside, and the amount deposited was directed to be refunded.

Ratio Decidendi: A notification issued to clarify an existing exemption and remove ambiguity is retrospective in operation and cannot be treated as creating a fresh liability for the intervening period.

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