2017 (8) TMI 1040 - AT - Central Excise

Exemption under N/N. 5/98-C.E., dated 21-6-1998 - The department s case is that appellant after aggregate clearances of ₹ 85 lakhs the appellant did not avail the consessional rate of duty @ 5%, whereas they have paid duty at the applicable rate should and consequently availed Modvat credit, therefore they are not entitled for exemption - Held that - In the notification there is no condition that for availing exemption notification the assessee cannot opt out in the middle of the financial year. As per condition of the notification for availing exemption Modvat credit should not be availed - In the present case since respondent has availed Modvat credit, they have cleared the goods at normal rate of duty therefore exemption availed upto the aggregate value of ₹ 85 lakhs cannot be disputed for the reason that during the clearance up to the said limit appellant has not availed Modvat credit, accordingly complied with the condition of N/N. 5/98-C.E - benefit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of exemption notification under Central Excise Tariff Act, 1985 regarding availing of Modvat credit and consessional rate of duty.

Analysis:
The case involved the interpretation of Notification No. 5/98-C.E. dated 21-6-1998 under the Central Excise Tariff Act, 1985. The respondent had availed exemption for plastic packaging goods under Chapter 3923.90 up to the value of clearances of ?85 lakhs, with a concessional rate of duty of 5% thereafter, subject to certain conditions. The issue arose when the appellant did not opt for the concessional rate of duty after reaching the ?85 lakhs limit and instead paid duty at the normal rate while availing Modvat credit, leading to a demand for payment of duty on clearances worth ?85 lakhs.

The Revenue contended that the respondent violated condition 10 of the notification by availing Modvat credit after reaching the exemption limit, making them liable to pay duty on the clearances of ?85 lakhs made under a nil rate of duty. The Commissioner (Appeals) had allowed the respondent's appeal, leading the Revenue to file an appeal before the Tribunal.

Upon careful examination of the notification, the Tribunal found that the exemption was applicable up to clearances of ?85 lakhs in a financial year at a nil rate of duty, with a 5% rate thereafter, provided Modvat credit was not availed on the input. The Tribunal noted that the appellant had not availed the exemption after reaching the limit but had paid normal duty and availed Modvat credit. Importantly, the notification did not specify that the assessee must continue availing the exemption throughout the financial year. Since the respondent had not availed Modvat credit up to the ?85 lakhs limit, they had complied with the conditions of the notification.

Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) to allow the exemption and dismissed the Revenue's appeal. The Tribunal clarified that the appellant was entitled to Modvat credit as per the notification, and the exemption availed up to ?85 lakhs could not be disputed since the conditions were met during the clearances up to that limit.

In conclusion, the Tribunal's decision was based on a strict interpretation of the conditions specified in the exemption notification, emphasizing that the appellant's compliance with the requirements allowed them to avail the exemption up to the prescribed limit despite not opting for the concessional rate of duty after reaching that threshold.