2007 (5) TMI 32 - AT - Central Excise

SSI Exemption Appellant contended that since they had not exercised option under Notification No. 9/99, so that the benefit of the Notification No. 8/99 couldn t be denied Held that appellant committed breach of the rules and allowed the appeal partly

Issues Involved:
1. Whether the appellant exercised the option under Notification No. 9/99.
2. Whether the appellant could switch from Notification No. 9/99 to Notification No. 8/99 within the same financial year.
3. Admissibility of Modvat credit.
4. Treatment of price as inclusive of duty.
5. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Exercise of Option under Notification No. 9/99:
The appellant contended that they never opted for the benefit under Notification No. 9/99. They argued that the declaration filed under Rule 173B was not an option as required by the notification, which necessitated a written option addressed to the Assistant Commissioner. The Tribunal found that the declaration under Rule 173B, filed with the Superintendent but meant for the proper officer (Assistant Commissioner), constituted a valid exercise of the option in writing as per para 2(i) of Notification No. 9/99. The declaration included all necessary particulars, and the appellant had made clearances at a concessional rate of duty under this notification. Thus, the Tribunal upheld the finding that the appellant had exercised the option under Notification No. 9/99.

2. Switching from Notification No. 9/99 to Notification No. 8/99:
The appellant switched to Notification No. 8/99 effective from 27-4-1999, seeking full exemption for the first aggregate clearance. However, the Tribunal held that once the appellant opted for the concessional rate under Notification No. 9/99, they could not switch to Notification No. 8/99 within the same financial year. The Tribunal emphasized that para 2(i) of Notification No. 9/99 explicitly prohibited withdrawing the option during the financial year. Therefore, the authorities below were justified in denying the appellant the benefits of Notification No. 8/99 for the remaining part of the financial year.

3. Admissibility of Modvat Credit:
The Tribunal noted that Modvat credit on inputs was inadmissible under para 2(iv) of Notification No. 8/99 but not under Notification No. 9/99. The authorities were directed to verify and allow Modvat credit if admissible under Notification No. 9/99 when recalculating the duty payable.

4. Treatment of Price as Inclusive of Duty:
The appellant argued that the price should be treated as inclusive of duty, based on the Supreme Court's decision in Commissioner of Central Excise, Delhi v. Maruti Udyog Ltd. The Tribunal allowed this contention, directing necessary adjustments to be made in line with the Supreme Court's ratio, thus recalculating the duty payable accordingly.

5. Imposition of Penalty:
The adjudicating authority imposed a penalty of Rs. 2,50,000/- under Rules 9(2), 52A, and 173Q. The appellant argued that no penalty should be imposed, citing a similar case where the Tribunal did not impose a penalty. The Tribunal found that the appellant had violated departmental directions and willfully misutilized the facility under Notification No. 9/99. However, considering the circumstances, the penalty was reduced to Rs. 5,000/-, the minimum prescribed under Rule 173Q.

Conclusion:
The Tribunal upheld the demand for duty of Rs. 3,29,078/- and recalculated the duty payable, considering the inclusive price and Modvat credit admissibility. The penalty was reduced from Rs. 2,50,000/- to Rs. 5,000/-. The appeal was partly allowed with these modifications.

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