Irrevocable small scale exemption option: mid-year withdrawal defeats the benefit for the entire financial year.

A small scale exemption under Notification No. 9/99-C.E. was treated as conditional on the assessee's option, once exercised before the first clearance, remaining in force for the entire financial year. Mid-year withdrawal was held to breach an integral term of the scheme, so the assessee could not retain the exemption for the earlier part of the year. The practical effect was that the assessee had to stay within the scheme for the whole year or remain outside it for the whole year; partial-year withdrawal was impermissible and the exemption was denied for that financial year.

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Issues: Whether a manufacturer who had exercised the option to avail a small scale exemption notification could withdraw from the scheme mid-financial year and still retain the exemption for the earlier part of the year.

Analysis: The exemption under Notification No. 9/99-C.E. was linked to clearances during the financial year and was subject to the condition that the option for the exemption, once exercised before the first clearance, would remain effective for the rest of the financial year and could not be withdrawn. The condition was treated as integral to the scheme. Once the assessee opted out during the year, it violated the notification's terms. Since the exemption was financial year based, the breach meant that the assessee could not claim the benefit from the beginning of the year and had to choose either to remain within the scheme for the whole year or to stay outside it for the whole year.

Conclusion: The mid-year withdrawal was impermissible and the exemption was denied ab initio for that financial year; the appeal failed.

Ratio Decidendi: Where a fiscal exemption notification makes the option irrevocable for the remaining part of the financial year, withdrawal of that option during the year disentitles the assessee to the exemption for the year as a whole.

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