Post-de-licensing exemption rules: pre-notification clearances cannot defeat cement factory relief absent clear wording.

Notification No. 24/91-C.E. treated a post-de-licensing cement factory using a rotary kiln as falling within the category of factories not required to obtain an industrial licence, so the licence-based capacity condition could not be imported from the other category. The installed capacity and the relevant post-notification clearances remained within the prescribed ceiling, so the exemption was available. The third proviso could not be invoked on the basis of clearances made in financial years before the notification, because only clearances during the relevant period were material. Appeals succeeded and the denial of exemption, duty demand, and penalty were set aside.

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Issues: (i) whether a cement factory using rotary kiln, which stood delicensed after the notification, was to be treated as a factory not required to obtain an industrial licence for the purpose of the exemption under Notification No. 24/91-C.E. dated 25.07.1991; (ii) whether higher clearances in financial years preceding the notification could be relied upon to deny the exemption under the third proviso.

Issue (i): whether a cement factory using rotary kiln, which stood delicensed after the notification, was to be treated as a factory not required to obtain an industrial licence for the purpose of the exemption under Notification No. 24/91-C.E. dated 25.07.1991.

Analysis: The notification created separate categories for factories requiring an industrial licence and those not requiring one, each with its own capacity condition. For the relevant period after de-licensing of the cement industry, the factory fell within the category of a factory not required to obtain an industrial licence. Once that category applied, the condition attached to the licensed-capacity category could not be imported. The certificate showed installed capacity within the prescribed limit and the relevant post-notification period did not show breach of the clearances ceiling.

Conclusion: The factory was entitled to be treated under the category of a factory not required to obtain an industrial licence, and the exemption was available in its favour.

Issue (ii): whether higher clearances in financial years preceding the notification could be relied upon to deny the exemption under the third proviso.

Analysis: The third proviso was read in the context of the notification issued on 25.07.1991. The language did not indicate an intention to disqualify a factory on the basis of clearances made in years prior to the notification. Only the clearances during the period under consideration were material, and those had not crossed the prescribed ceiling.

Conclusion: Earlier clearances could not be used to deny the exemption, and the proviso did not operate against the assessee.

Final Conclusion: The appeals were allowed and the orders denying exemption and confirming duty demand and penalty were set aside, with consequential relief to follow.

Ratio Decidendi: For a post-de-licensing period, entitlement under an exemption notification must be determined by the applicable category in the notification and the conditions attached to that category; pre-notification clearances cannot be used to defeat the exemption unless the notification clearly so provides.

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