When does an exemption notification becomes effective?

Mayank Agarwal

Sec 5A (5) of the Central Excise Act, 1944 deal with provisions regarding effective date of a notification. It states as under:

(5) Every notification issued under sub-section (1) or sub-section (2A) shall,—

(a) unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette;

(b) also be published and offered for sale on the date of its issue by the Directorate of Publicity and Public Relations, Customs and Central Excise, New Delhi, under the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963).

Clearly, the notification will come into effect on the day specified in the notification, if any, else it will come into effect on the date of its issue by the Central Government for publication in the Official Gazette.

Suppose a tariff notification is issued by the government with no effective date and thus as per the aforesaid provision, the notification is effective on the same day. It presupposes that the entire day removal of goods is to be effected at the new tariff rate. However, till the time the notification is not available in the public domain, how the clearances made prior to the event will be made at new tariff rates is a puzzling question for the manufacturers. Will the department allow refund of excise duty in event of decline of tariff rates? Similar provisions exist in Custom laws.

It is significant here to look into the Hon’ble Supreme Court judgment in case of M/s Param Industries Ltd in 2015. The apex court held that

“though the notification may have been published on the date when the goods were cleared, it was not offered for sale by the concerned Board, which event took place much thereafter. Therefore, it was not justified and lawful on the part of the Department to claim the differential amount of duty on the basis of said notification.”

The issue in the case was that the custom tariff was raised but the notification on the same was offered for sale at much later date. The courts held that for bringing the notification into force and make it effective, two conditions are mandatory, viz., (1) Notification should be duly published in the official gazette, (2) it should be offered for sale on the date of its issue by the Directorate of Publicity and Public Relations of the Board, New Delhi. In the present case, admittedly, second condition was not satisfied inasmuch as it was offered for sale only on 06.08.2001, as it was published on 03.08.2001 in late evening hours and 04/05.08.2001 were holidays.

Clearly, the court judgment came as a big relief to the assesses as it was to avoid unnecessary litigation with the department. The government however decided to amend the law and overruled the apex court judgement. Clause 139 of the Finance Bill, 2016 seeks to amend Section 5A so as to omit the requirement of  publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC.

The assesses are once again struck in the dilemma and the government is having the last laugh.

Extract of Clause 139 of the Finance Bill, 2016

Clause 139 of the Bill seeks to amend section 5A of the Central Excise Act so as to substitute sub-section (5) to provide that every notification issued under sub-section (1) or sub-section (2A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette. It is further proposed to omit sub-section (6) thereof.

Extract of Amendment Proposed in Section 5A of  Central Excise Act, 1944 vide Finance Bill ,2016

139. In the Central Excise Act, 1944 (hereinafter referred to as the Central Excise Act), in section 5A,––

(i) for sub-section (5), the following sub-section shall be substituted, namely:––

“(5) Every notification issued under sub-section (1) or sub-section (2A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette.”;

(ii) sub-section (6) shall be omitted.