2006 (5) TMI 497 - HC - Central Excise

Summary

Issues:
1. Availing of MODVAT scheme under Notification No. 38/97-CE.
2. Denial of SSI exemption under Notification No. 16/97.
3. Imposition of penalty and interest under Central Excise Rules.
4. Appeal to Commissioner (Appeals) and subsequent Tribunal decision.

Analysis:
1. The respondent company, engaged in manufacturing Electrical Switch Gears and Motor Starters, availed the MODVAT scheme under Notification No. 38/97-CE in September 1997. The contention arose when Excise authorities claimed that the respondent opted for the scheme in violation of conditions under Notification No. 16/97-CE dated 1st April 1997, as their clearances were below the specified threshold. A show cause notice was issued, leading to a demand of Rs. 7,15,186/- under Rule 9(2) of Central Excise Rules, 1944, along with a penalty and interest imposition.

2. The respondent appealed to the Commissioner (Appeals) against the denial of SSI exemption under Notification No. 16/97. While the Commissioner confirmed the denial, the penalty imposed by the Deputy Commissioner was deleted. Subsequently, the Tribunal, in an appeal, set aside the orders of the lower authorities, allowing the appeal filed by the assessee. The Tribunal found that the respondent was compelled to pay full duty due to an adjudication order in another matter, which did not constitute a voluntary opt-out of the SSI exemption scheme.

3. The High Court reviewed the Tribunal's decision and concurred with the findings. It noted that the respondent's payment of full duty was a result of a lawful order by the Commissioner, not a voluntary abandonment of the SSI exemption. The Court agreed with the Tribunal's observation that the demand of duty was based on an alleged contravention of Notification No. 16/97, which was deemed unsustainable. Consequently, the High Court dismissed the appeal, finding no legal basis for challenging the Tribunal's decision.

4. In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the respondent's compliance with the Commissioner's order did not constitute a violation of the conditions of the SSI exemption notification. The appeal was dismissed, affirming the Tribunal's ruling in favor of the respondent company.