Rationale for grant of exemption :
The power for grant of exemption vests with the Central Government subject to the overall control of the Parliament. The Government on a rational basis may discretely use this power and the exemptions may be based on any of the following bases:
a. Moral grounds, where the duty should not be levied at all. Some of the instances, which may be given, are;
(i) Where the goods do not reach the Indian soil at all.
(ii) Where the goods have reached the Indian soil but are not available for consumption.
(iii) Where the goods get damaged or deteriorated in transit.
b. Discretionary provision, where the exemption is used for controlling the economy and industrial growth of the country.
- Interpretation of Exemption Notifications
In Kasinka Trading v. U.O.I. 1994 (74) E.L.T. 782, the Supreme Court held that the power to exempt includes the power to modify or withdraw in terms of Section 21 of the General Clauses Act, 1897. It was held that even a time bound exemption notification issued under section 5A of the Central Excise Act, 1944, or section 25 of the Customs Act, 1962 can be modified and revoked if it is in public interest and the doctrine of Promissory Estoppel cannot be invoked since a notification cannot be said to be making a representation or a promise to a party getting benefit thereof.
The Supreme Court has held in Pankaj Jain Agencies v. U.O.I. 1994 (72) E.L.T. 805 that a Notification is to take effect from the date of the publication in the Official Gazette. In ITC Ltd. v. CCE 1996 (86) E.L.T. 477 the Supreme Court reiterated this view and said that nonavailability of the Gazette on the date of issue of the notification will not affect the operativeness and enforceability of the notification particularly when there are radio announcements and press releases explaining the changes on the very day
An exemption notification cannot be withdrawn and duty cannot be demanded with retrospective effect [Honest Corporation v. State of Tamil Nadu 1999 STC 113 (HC)].
Effective date: Section 25 of the Act provides that the date of effect of the notification will be the date of its issue. It also provides for statutory obligation on the part of the Department to publish and sell the notifications to the public through Directorate of Publicity and Public Relations on or before the date on which the notification will be effective.
The following issues need to be kept in mind in case of general exemption.
(i) Where the exemption notification does not mention the date of its effect, the notification comes into effect from the date of its issue by the Central Government for publication in the Official Gazette. It shall be published and also offered for sale on the date of its issue.
(ii) At times, the exemption notification may also come into force from a date later th an the date of issue. In such a case the notification shall be published and offered for sale on or before the date from which it comes into force.
(iii) Where the exemption is through a special order, the above rules do not apply. Special orders are issued separately for each case and communicated to the beneficiary directly by the Government. The beneficiary can claim refund for the period reckoned from the date of its issue.
Sub-section 2A empowers the Government to issue clarifications to the notifications within one year from the issue of the notification and such clarifications will have retrospective effect.