Exemption notifications operate prospectively, clearance limits are computed from the financial year start, and Modvat choice may remain available.

Exemption notification clearances were to be computed on a financial-year basis from 1-4-1994, including clearances made on payment of duty, so the aggregate limit could not start only from 25-4-1994. Notification No. 90/94 was held to operate prospectively from its date of issue because it contained no express retrospective effect. The assessee could elect between paying duty and taking Modvat credit on inputs or opting for exemption on the final product where the scheme permitted such choice. Duty liability was therefore to be recomputed, the penalty was set aside, and the matter was remitted for fresh determination after hearing the assessee.

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Issues: (i) Whether the aggregate value of clearances for the exemption limit of Rs. 30 lakhs was to be computed from 1-4-1994 or from 25-4-1994; (ii) whether Notification No. 90/94 operated retrospectively or prospectively; (iii) whether the assessee could either pay duty and take Modvat credit or avail exemption under the notification.

Issue (i): Whether the aggregate value of clearances for the exemption limit of Rs. 30 lakhs was to be computed from 1-4-1994 or from 25-4-1994.

Analysis: The aggregate clearance limit had to be worked out on a financial year basis. Clearances made from the beginning of the financial year, including clearances effected on payment of duty, were relevant for computing the aggregate value.

Conclusion: The computation was to commence from 1-4-1994, not from 25-4-1994, and this issue was against the assessee.

Issue (ii): Whether Notification No. 90/94 operated retrospectively or prospectively.

Analysis: The notification was issued on 25-4-1994 and contained no indication of retrospective operation. In the absence of any express contrary provision, the notification took effect from the date of its issue.

Conclusion: Notification No. 90/94 operated prospectively from 25-4-1994, and this issue was against the assessee.

Issue (iii): Whether the assessee could either pay duty and take Modvat credit or avail exemption under the notification.

Analysis: The Tribunal applied the settled position that an assessee may choose between paying duty and availing Modvat credit on inputs or opting for exemption on the final product, and that the option was available in the present factual setting from the relevant date of exemption.

Conclusion: The assessee had the option to choose between duty with Modvat credit and exemption, and this issue was in favour of the assessee.

Final Conclusion: The duty liability required recomputation by the adjudicating authority, the penalty was set aside, and the matter was sent back for fresh determination after hearing the assessee.

Ratio Decidendi: Exemption notifications operate prospectively unless expressly made retrospective, clearance limits under a fiscal exemption are computed year-wise from the start of the financial year, and an assessee may elect between duty payment with input credit and exemption where the scheme permits such choice.

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