2012 (9) TMI 26 - HC - Central Excise

Whether the facility of deemed modvat would be available to the re-rollers even after crossing the monetary limit of Rs. 75 Lakhs in respect of value of clearances, in terms of Notification No. 1/93 dated 28-2-1993 Held that - Benefit extended to a small scale unit whose total clearances to not extend Rs. 2 Crores - assessee can claim benefit under this notification, the first condition to be fulfilled is that his clearances should be less than Rs. 2 Crores. Once that condition is fulfilled, on the first Rs. 75 Lakhs clearances he can avail the benefit of concessional payment of rate of duty as prescribed under the notification, i.e. first Rs. 30 Lakhs, then Rs. 20 Lakhs and then Rs. 25 Lakhs - in favour of the assessee

Summary

Issues:
1. Interpretation of Notification No. 1/1993-Central Excise regarding deemed modvat credit eligibility.
2. Applicability of concessional rate of duty under the notification based on total turnover.
3. Dispute over entitlement to exemption under the notification if clearances exceed Rs. 75 Lakhs but are less than Rs. 2 Crores.

Issue 1: Interpretation of Notification No. 1/1993-Central Excise:
The judgment revolves around the interpretation of Notification No. 1/1993-Central Excise, specifically concerning the availability of deemed modvat credit to re-rollers even after surpassing the monetary limit of Rs. 75 Lakhs in clearances. The assessee, a Small Scale Industry (SSI) unit, availed deemed credit for re-rollable materials to manufacture and clear their products at a concessional duty rate. The assessing authority issued a notice to pay duty as the total turnover exceeded Rs. 75 Lakhs, questioning the continuation of the deemed credit. The Commissioner of Customs and Excise initially ruled in favor of the assessee, but the Tribunal's decision varied for different appeals, leading to references being made.

Issue 2: Applicability of Concessional Rate of Duty Based on Total Turnover:
The critical question was whether the benefit of the concessional rate of duty under the notification should be denied once the total turnover exceeds Rs. 75 Lakhs. The High Court analyzed the notification's provisions, emphasizing that the benefit is intended for small-scale units with total clearances below Rs. 2 Crores. The notification outlines specific requirements for eligibility, including the total clearances being less than Rs. 2 Crores. It further clarifies that once these conditions are met, the assessee can avail the concessional duty rate up to Rs. 75 Lakhs in clearances, divided into three slabs. The Court deemed the Larger Bench's view, denying the benefit once clearances exceed Rs. 75 Lakhs, as illegal and contrary to the notification's intent, ruling in favor of the assessee.

Issue 3: Dispute Over Exemption Entitlement Within Specified Clearances Range:
The judgment referred to precedents from the High Courts of Himachal Pradesh and Punjab and Haryana, highlighting that manufacturers with clearances below Rs. 2 Crores are entitled to the notification's benefits, even if their clearances exceed Rs. 75 Lakhs. The Court reiterated that the notification aims to support manufacturers meeting the specified criteria, emphasizing that the total clearances being less than Rs. 2 Crores is the primary condition for eligibility. The decision favored the assessee, emphasizing that the denial of concessional rate once clearances surpass Rs. 75 Lakhs contradicts the notification's provisions. Consequently, the Court ruled in favor of the assessee and against the revenue in all references, aligning with the interpretation supporting small-scale units meeting the notification's criteria.