Retrospective excise exemption applied to captively used goods, preserving exemption and defeating the duty demand.

A retrospective exemption notification was held to cover wooden crates and cases manufactured for captive consumption in glass and glassware production, because the statutory deeming provision under the Central Duties of Excise (Retrospective Exemption) Act, 1986 gave Notification No. 227/86-C.E. effect from 1-3-1986. The fact that the later notification also extended to goods cleared for home consumption did not limit its application to captively used goods. The retrospective exemption cured the gap created after the earlier notification was rescinded, so the assessee remained entitled to exemption and the duty demand and penalty could not stand.

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Issues: Whether Notification No. 227/86-C.E. dated 3-4-1986, given retrospective effect by Section 2 of the Central Duties of Excise (Retrospective Exemption) Act, 1986, applied to goods manufactured for captive consumption and entitled the assessee to exemption from duty.

Analysis: The assessee had been enjoying exemption under Notification No. 118/75-C.E. for wooden crates and cases used captively in the manufacture of glass and glassware. After rescission of that notification, the goods would otherwise have attracted duty for the interregnum before Notification No. 227/86-C.E. came into force. The retrospective exemption statute expressly deemed such notifications to have effect from 1-3-1986 for goods covered by them. The wider scope of the later notification, which also extended to goods cleared for home consumption, did not detract from its applicability to goods used for captive consumption. The statutory deeming provision cured the gap and preserved the exemption for the assessee's goods.

Conclusion: The retrospective exemption under Notification No. 227/86-C.E. applied to the assessee's captively consumed goods, and the demand of duty and penalty could not stand.

Ratio Decidendi: Where a later exemption notification is expressly given retrospective effect by statute, the exemption applies to goods falling within its coverage notwithstanding a wider scope of the notification, provided the goods were otherwise eligible for exemption.

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