2003 (9) TMI 589 - AT - Central Excise

Summary

Issues involved:
- Whether the benefit of exemption under Notification No. 3/2001-C.E. is available for bulbs with a retail sale value not exceeding Rs. 20 per bulb.

Analysis:
The appeal in question revolves around the eligibility of M/s. Surya Roshni Ltd. to avail the benefit of exemption under Notification No. 3/2001-C.E. The appellant argued that they manufacture bulbs falling under the mentioned notification and comply with the conditions set forth, including not availing credit of duty paid on inputs. They explained that they reverse Modvat credit attributable to inputs used in the manufacture of exempted bulbs on a fortnightly basis before paying excise duty. The Commissioner, however, denied the concessional rate of duty citing that the Modvat credit was initially taken by the appellants, hence not complying with the notification's condition.

The appellant contended that they took Modvat credit for inputs used in intermediate products, as it was uncertain how much would be used in manufacturing exempted bulbs. They ensured that the Modvat credit was proportionately reversed before paying duty on the final product, maintaining a sufficient balance in the Modvat credit account. They cited relevant judicial precedents to support their position, emphasizing that the reversal of credit was for documentation convenience and did not provide any undue benefit. The appellant highlighted a case where the Tribunal accepted a similar credit reversal practice.

On the other hand, the respondent reiterated the findings of the impugned order, emphasizing that the reversal of Modvat credit by the appellant was not done before the removal of intermediate products used in exempted bulb manufacture. The respondent argued that the appellant failed to provide evidence that credit reversal was consistently done before the removal of exempted consignments from the factory, as required by the notification.

Upon considering both arguments, the Tribunal analyzed Notification No. 3/2001 (Sl. No. 262) which provides a concessional rate of duty for bulbs meeting specified criteria. It was noted that the appellant availed Modvat credit for inputs used in manufacturing various components, which was then reversed on a fortnightly basis before paying excise duty on the exempted bulbs. Citing the Supreme Court's decision in Chandrapur Magnet Wires case, the Tribunal concluded that the reversal of Modvat credit before duty payment on the final exempted product was permissible. As the appellant complied with the notification's conditions by reversing the Modvat credit before paying duty on the exempted bulbs, the Tribunal set aside the impugned order and allowed the appeal.