1997 (12) TMI 593 - AT - Central Excise

Summary

Issues Involved:
1. Whether an assessee has the option not to avail exemption under Notification No. 1/93, dated 28-2-1993, and instead opt for the Modvat scheme.

Detailed Analysis:

1. Assessee's Option to Avail Exemption or Opt for Modvat Scheme:

Collector's Decision:
The Collector of Central Excise held that an assessee does not have the option to forgo the exemption under Notification No. 1/93 and opt for the Modvat scheme. This decision was based on the Andhra Pradesh High Court's ruling in the case of Ganesh Metal Processing Industry, which stated that the assumption of such an option has no legal basis.

Tribunal's Previous Decisions:
The Tribunal had previously ruled in multiple cases, such as Everest Converters v. Collector of Central Excise, Calcutta, and CCE, Madras v. M/s. Sharna Industries, that the assessee has the option to either avail of the exemption or opt for the Modvat scheme. These rulings were based on the principle that the choice to claim or not to claim the benefit of an exemption notification issued under Section 5A(i) of the Central Excises and Salt Act lies with the assessee.

Andhra Pradesh High Court's Judgment:
The Andhra Pradesh High Court in Ganesh Metal Processing Industry held that Rule 57C categorically states that no credit shall be admissible if the final product is exempt from the whole of the duty of excise or is chargeable to nil rate of duty. This rule does not provide any option to the assessee to claim exemption or to avail of Modvat credit.

Tribunal's Examination of Notification 202/88:
The Tribunal noted that the High Court's judgment in Ganesh Metal Processing Industry was specific to Notification 202/88, which exempted goods made from specified inputs on which duty had already been paid. The Tribunal observed that this was a conditional notification, unlike Notification 1/93, which provided a straight exemption up to Rs. 30,00,000 for certain factories.

Conflicting Views and Larger Bench Reference:
Given the conflicting views, the Tribunal decided to refer the matter to a Larger Bench for resolution. The Tribunal acknowledged the need to resolve whether an assessee has the option to not avail exemption under Notification 1/93 and opt for the Modvat scheme.

Member (Judicial) Contra Opinion:
One member (Judicial) disagreed with the need for a Larger Bench, arguing that the Tribunal had already distinguished the High Court's decision in Ganesh Metal Processing Industry in previous cases. The member cited the Tribunal's decisions in Everest Converters and Mechiev Engineers, which held that the facts in the High Court case were different and that the assessee has the option to avail of Modvat credit even if an exemption notification exists.

Precedent Cases and Tribunal's Majority View:
The Tribunal's majority view, supported by multiple precedent cases, was that an exemption notification is a beneficial piece of legislation, and it is up to the assessee to claim its benefit or not. The Tribunal emphasized that both the exemption notification and the Modvat scheme are statutory benefits available to the manufacturer, and the choice between them lies with the assessee.

Final Decision:
In light of the majority view, the Tribunal set aside the impugned orders and allowed the appeals, affirming that the appellants were entitled to the option of availing the exemption notification or the Modvat scheme.