2009 (8) TMI 831 - HC - Central Excise

Whether the Tribunal erred in not seeing the distinction between an exemption granted under Section 5-A(1) and Section 5-A(2) - though the difference between the notification under Section 5A(1) and 5A(2) has been amplified and argued, the Tribunal has not considered the same, but merely saying that Rule 57-C of the Central Excise Rules provides that the benefit would be available only when the goods manufactured are excisable goods and liable to levy excise duty and when the final product manufactured is not liable for excise duty and the rate of duty is Nil, the benefit under Rule C (sic) is not availed, without considering the fact of such exemption, granted under Section 5A(2) of the Act, Matter remanded to Tribunal

Summary

Issues:
1. Interpretation of exemption under Section 5-A(1) and Section 5-A(2) of the Central Excise Act.
2. Application of Rule 57-C in cases of ad hoc exemptions.
3. Eligibility for Modvat credit in relation to manufactured goods.

Analysis:
1. The case involved a Government undertaking participating in a global tender for supplying stainless steel coin blanks to the Indian Government Mint. Due to the unavailability of a blanking facility in India, the petitioner arranged for the conversion of stainless steel strips abroad. A partial quantity was supplied from abroad, and the remaining quantity was supplied after the installation of a blanking line in India.

2. The Government, under Section 5A of the Central Excise Act, issued a notification in 1994 exempting a specific quantity of stainless steel coin blanks from excise duty. However, when the petitioner sought Modvat credit for the manufactured goods, it was denied based on the application of Rule 57-C of the Central Excise Rules, which was upheld by the CEGAT.

3. The petitioner contended that the Tribunal erred in not recognizing the distinction between exemptions under Section 5-A(1) and Section 5-A(2). The petitioner argued that the exemption granted under Section 5-A(2) should have allowed for the Modvat credit, contrary to the Tribunal's decision based on Rule 57-C.

4. In light of the legal questions raised and the significance of the issue, the High Court directed the Tribunal to refer the substantial questions of law for adjudication. The Court emphasized the need for a clear interpretation of the provisions and a definitive ruling on the matter to resolve the dispute regarding the eligibility for Modvat credit under ad hoc exemptions granted under Section 5-A(2).

This detailed analysis highlights the key aspects of the judgment, including the factual background, legal arguments presented, and the Court's directive for further examination of the legal issues raised in the case.