2003 (10) TMI 360 - AT - Central Excise

Summary

Issues:
Interpretation of Notification 4/97-C.E. regarding the availment of Modvat credit on inputs used in the manufacture of goods cleared at nil rate of duty.

Detailed Analysis:

1. Facts of the Case:
The case involves a dispute where the respondents, engaged in manufacturing plastic products, cleared goods at different duty rates and claimed Modvat credit for some while availing exemption under Notification 4/97 for others. The Assistant Commissioner disallowed the benefit of the notification due to the availed Modvat credit on inputs used in the manufacture of goods cleared at nil rate of duty.

2. Interpretation of Notification:
The main issue is whether the benefit of nil rate of duty under the notification is available for goods cleared without availing Modvat credit on inputs. The department argued against the benefit, citing the availed credit on inputs used in goods cleared at a duty rate. However, it was acknowledged that Modvat credit was not claimed on goods cleared without payment of duty, ensuring no double benefit was availed.

3. Legal Precedents and Analysis:
The Tribunal referred to the case of Shivalik Agro Poly Products Ltd. v. CCE, Chandigarh and the Supreme Court decision in Chandrapur Magnet Wires (P) Ltd. v. CCE, Nagpur to support their view. It was concluded that the availment of credit on inputs not used in goods cleared under the notification does not disentitle the respondents from the exemption benefits. The Tribunal noted that Notification 5/98-C.E. introduced restrictions on credit availment for concessional rates/exemptions.

4. Decision and Rationale:
After considering the arguments and legal precedents, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the appeal by the Revenue. It was concluded that the respondents were entitled to the benefit of the exemption under Notification 4/97-C.E. despite availing Modvat credit on inputs used in the manufacture of goods cleared at a duty rate, as long as no double benefit was obtained.

In summary, the judgment clarified the interpretation of Notification 4/97-C.E. regarding the availment of Modvat credit on inputs used in goods cleared at nil rate of duty. The Tribunal emphasized that the availment of credit on inputs not used in goods cleared under the notification does not disqualify the manufacturer from exemption benefits. The decision was supported by legal precedents and the introduction of restrictions on credit availment in subsequent notifications.