Case Law Details
Srinivasa Enterprises Vs Commissioner of Customs & Central Excise (CESTAT Hyderabad)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, heard an appeal filed against an Order-in-Original dated 17.07.2014 confirming Central Excise duty by including, in the assessable value of glued joints, the value of rails supplied free of cost by Indian Railways for manufacture of those goods.
The dispute was confined to a single issue. The Adjudicating Authority had confirmed the duty demand on the ground that, during the relevant period from 17.03.2012 to 03.02.2014, no exemption was available permitting exclusion of the value of rails supplied free of cost by Indian Railways from the assessable value of glued joints.
The appellant manufactured glued joints classifiable under Chapter Heading 8530 of the Central Excise Tariff Act, 1985. Under contracts awarded by Indian Railways, the Railways supplied rails free of cost to the appellant, who manufactured glued joints using those rails and supplied the finished goods back to the Railways. Proceedings were initiated alleging that the value of the free-supplied rails should be included in the assessable value of the glued joints, resulting in a demand of duty along with interest and penalties. The Adjudicating Authority confirmed the demand because no specific exemption existed during the relevant period.
Before the Tribunal, the appellant contended that the very basis of the demand no longer survived because of a retrospective amendment introduced through the Finance Act, 2015. According to the appellant, Entry No. 205A was inserted in Notification No. 12/2012-C.E., granting retrospective exemption for the value of rails supplied free of cost by Indian Railways for manufacture of glued joints. The exemption specifically covered the period from 17.03.2012 to 03.02.2014, which was the exact period involved in the present dispute. The appellant argued that, since the retrospective amendment was not available when the Adjudicating Authority decided the matter, the case should be remanded for fresh consideration under the amended statutory provisions.
The Department reiterated the findings of the impugned order but fairly acknowledged that the Finance Act, 2015 amendment was not available before the Adjudicating Authority when the order was passed and submitted that appropriate directions could be issued in accordance with law.
The Tribunal found no dispute regarding the facts that the appellant manufactured glued joints using rails supplied free of cost by Indian Railways and that the demand had been confirmed solely because no exemption existed during the relevant period. It observed that, after the impugned order, Parliament enacted the Finance Act, 2015, inserting Entry No. 205A in Notification No. 12/2012-C.E. with retrospective effect for the same period involved in the appeal.
The Tribunal held that once an exemption is granted retrospectively, the amended provision is deemed to have existed from the specified date and all pending proceedings must be decided in accordance with the amended law. Since the original order had proceeded on the premise that no exemption was available, that premise no longer survived after the retrospective legislative amendment. However, as the Adjudicating Authority had no opportunity to examine the appellant’s eligibility under the retrospective exemption, the matter required fresh consideration.
Accordingly, the Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority for fresh adjudication in light of the retrospective exemption introduced through the Finance Act, 2015. It kept all issues, including eligibility to exemption, valuation, quantification of demand, interest, penalty, limitation, and all other legal and factual contentions, open for fresh consideration. The appeal was allowed by way of remand.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
The present appeal has been filed by M/s Srinivasa Enterprises against the impugned Order-in-Original No. HYD-EXCUS-003-COM-19-14-15 dated 17.07.2014, whereby, Central Excise Duty has been confirmed by including in the assessable value, the value of rails supplied free of cost by Indian Railways for manufacture of glued joints supplied by the appellant to the Railways.
2. The dispute lies in a narrow compass. The sole basis adopted by the Adjudicating Authority for confirmation of demand is that during the relevant period, namely from 17.03.2012 to 03.02.2014, no exemption was available for exclusion of the value of rails supplied free of cost by Indian Railways and, therefore, such value was required to be added to the assessable value of glued joints manufactured and supplied by the appellant.
3. Subsequent to the passing of the impugned order, the statutory provision underwent a significant change by virtue of retrospective amendment brought through the Finance Act, 2015. The effect of such amendment and its impact on the impugned demand is the issue requiring determination in the present appeal.
4. The fact, in brief, is that the appellant is engaged in manufacture of glued joints classifiable under chapter heading 8530 of the Central Excise Tariff Act, 1985. Indian Railway awarded contracts to the appellant for manufacture and supply of glued joints. For execution of the said contracts, rails were supplied free of cost by Indian Railways. The appellant undertook the process of manufacturing glued joints using such rails and supplied the finished goods to the Railways in accordance with contractual requirements.
5. Proceedings were initiated against the appellant alleging that the value of rails supplied free of cost by Indian Railways was liable to be included in the assessable value of the glued joints. Consequently, duty demand along with interest and penalties was proposed.
6. The Adjudicating Authority confirmed the demand primarily on the ground that during the relevant period there existed no specific exemption permitting exclusion of the value of free-supplied rails from assessable value.
7. Aggrieved by the said order, the appellant filed the present appeal before this Tribunal.
8. Learned Counsel for the appellant submits that the very foundation of the impugned demand no longer survives in view of the retrospective amendment introduced through the Finance Act, 2015. It is submitted that the Government, after considering the peculiar nature of supplies made to Indian Railways, inserted Entry No. 205A in Notification No. 12/2012-C.E. through the Finance Act, 2015 and granted retrospective exemption in respect of the value of rails supplied free of cost by Indian Railways for manufacture of glued joints. It is further argued that the retrospective exemption specifically covers the period from 17.03.2012 to 03.02.2014, which is exactly the period involved in the present proceedings.
9. According to the appellant, once the legislature itself has retrospectively exempted the value of free-supplied rails from duty, the basis on which the Adjudicating Authority confirmed the demand disappears and the impugned order cannot be sustained. The Learned Counsel submits that since the retrospective amendment was not available before the Adjudicating Authority at the time of adjudication, the matter may be remanded for fresh consideration in the light of the amended statutory provisions.
10.The Learned Authorized Representatives reiterates the findings recorded in the impugned order. However, he fairly submitted that the amendment introduced through the Finance Act, 2015 was not available before the Adjudicating Authority while passing impugned order and appropriate directions may be issued by the Tribunal in accordance with law.
11. We have heard both the sides and perused the records with their submissions.
12. There is no dispute regarding the factual position that the appellant manufactured glued joints using rails, supplied free of cost by Indian Railways. It is also not in dispute that the Adjudicating Authority confirmed the demand solely on the ground that no exemption was available during the relevant period for exclusion of the value of rails supplied free of cost.
13. The records reveal that subsequent to the passing of the impugned order, Parliament enacted the Finance Act, 2015, whereby, Entry No. 205A was inserted in Notification No. 12/2012-C.E. granting exemption in respect of rails supplied free of cost by Indian Railways for manufacture of glued joints. More importantly, the exemption was made applicable retrospectively for the period from 17.03.2012 to 03.02.2014. The period covered by the retrospective exemption is precisely the same period involved in the present proceedings. The legal effect of retrospective exemption is well settled. Once the legislature grants exemption with retrospective effect, the amended provision is deemed to have existed from the date specified therein. Consequently, all pending proceedings are required to be decided in accordance with amended law.
14. In the present case, the Adjudicating Authority proceeded on the basis that no exemption existed. That premise no longer survives after enactment of the Finance Act, 2015. The very basis for inclusion of the value of free-supplied rails in the assessable value, therefore, stands materially altered. The Tribunal cannot ignore a retrospective legislative amendment which directly governs the dispute before it. The impugned order must necessarily be tested in the light of the amended statutory framework. At the same time, we find that the Adjudicating Authority had no occasion to examine the appellant’s eligibility under the retrospective exemption because the amendment was not in existence when the impugned order was passed.
15. In our considered view, the interests of justice would be served by remanding the matter to the Adjudicating Authority for fresh adjudication in the light of retrospective exemption introduced through Finance Act, 2015.
16. Accordingly, we hold that the impugned demand was confirmed on the premise that no exemption was available in respect of rails supplied free of cost by Indian Railways. Subsequent to adjudication, retrospective exemption has been granted through insertion of Entry No. 205A in Notification No. 12/2012 – C.E. by the Finance Act, 2015. The retrospective exemption covers the very period involved in the present dispute, namely 17.03.2012 to 03.02.2014. Therefore, impugned order requires reconsideration in light of the subsequent statutory amendment.
17. All issues including eligibility to exemption, valuation, quantification of demand, interest, penalty, limitation and all other legal and factual contentions are kept open.
18. In view of the above discussion, the impugned order is set aside and matter is remanded to the Adjudication Authority for fresh adjudication in accordance with law after taking into consideration the retrospective exemption granted through amendment as discuss above.
19. Therefore, appeal is allowed by way of remand.
(Pronounced in the open court on 06.2026 )
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