2002 (10) TMI 461 - AT - Central Excise

Summary

Issues Involved:
Grant of deemed Modvat credit after exceeding exemption limit for clearances under Notification No. 1/93-C.E., dated 28-2-1993.

Comprehensive Analysis:

Issue 1: Grant of Deemed Modvat Credit
The case involved an appeal regarding the grant of deemed Modvat credit after the assessee exceeded the exemption limit for clearances under Notification No. 1/93-C.E., dated 28-2-1993. The Commissioner of Central Excise (Appeals), Madras, had previously held that once an SSI manufacturer crosses Rs. 75 lakhs turnover in a financial year, they would have to pay the appropriate full rate of duty. However, the Commissioner emphasized that exceeding this limit does not automatically disqualify the manufacturer from being considered an SSI unit. The eligibility for the benefit of the SSI notification for the next financial year is determined based on the aggregate value of clearances, and crossing Rs. 75 lakhs does not immediately exclude the unit from SSI benefits. The Commissioner's order was upheld by the Tribunal, citing a previous judgment in the case of CCE, Coimbatore v. M/s. South India Steel Industries, where it was noted that the facility of deemed Modvat credit is available to manufacturers eligible for the benefit of Notification 1/93. The Tribunal emphasized that the character of operations does not change for manufacturers exceeding Rs. 75 lakhs, and they continue to be eligible for the benefit under the notification. The Tribunal dismissed the Revenue's appeal, stating that the lower appellate authority's order was legally sustainable.

Issue 2: Rejection of Reference Application
Subsequently, the Revenue filed a reference application, which was rejected by the Tribunal in its order dated 2-7-1998. The Tribunal did not accept the Revenue's plea and refused the reference application, leading the Revenue to file a Review Cum Appeal Petition (RCP) before the High Court. The High Court directed the Tribunal to draw up a statement of facts for further consideration.

In conclusion, the judgment clarified the application of deemed Modvat credit and the eligibility of SSI units under Notification No. 1/93-C.E. The decision emphasized that crossing the exemption limit of Rs. 75 lakhs does not automatically disqualify a manufacturer from SSI benefits, and the facility of deemed Modvat credit continues to be available to eligible manufacturers even after exceeding this threshold. The Tribunal's orders were upheld, and the reference application by the Revenue was rejected, leading to further review by the High Court.