2003 (12) TMI 521 - AT - Central Excise

Summary

Issues:
Dispute over availment of deemed Modvat credit by small-scale units under Notification No. 1/93-C.E.

Analysis:
The dispute in this case revolves around the availment of deemed Modvat credit by small-scale units availing exemption under Notification No. 1/93-C.E. The Ministry's letter dated 1-3-94 allowed units availing small-scale exemption to take credit for specific inputs without producing duty paying documents up to a value limit of Rs. 75 Lakhs. However, beyond this limit, objections were raised regarding the continuation of taking credit in the same manner, citing the Ministry's letter as support.

Despite multiple opportunities, the Departmental Representative (D.R.) failed to produce a copy of the letter dated 1-3-94. However, it was revealed from another Ministry order that the letter granted the facility of deemed Modvat credit to "units availing the exemption under Notification No. 1/93-C.E., dated 28-2-93."

The judgment emphasizes that if the language in the letter indicated that the facility was available to "Unit availing exemption under Notification No. 1/93-C.E.," then a unit crossing the value limit of Rs. 75 Lakhs cannot be considered as not availing the exemption. The facility is extended to the entire unit, not just a specific part of its production. The eligibility for small-scale exemption is determined annually, and once established and undisputed, the unit continues to be considered as availing the exemption even if production exceeds Rs. 75 Lakhs.

Based on these considerations, the judgment concludes that the revenue appeal should be rejected. However, due to uncertainty regarding whether the deemed credit was availed beyond 15-3-95 when the facility was withdrawn, the case is remanded back to the Assistant/Deputy Commissioner to segregate the credit amount taken after that date and pass fresh orders within three months regarding its eligibility, following the principles of natural justice.

Ultimately, the appeal of the Revenue is allowed only to the extent of the de novo remand, leading to the setting aside of the lower authorities' orders.