1994 (9) TMI 94 - HC - Central Excise

S.S.I. Exemption - Modvat credit vis-a-vis full exemption from duty - Judicial review of fiscal policy - Writ Petition

Issues Involved:
1. Exemption under Notification No. 1/93-C.E.
2. Alternative remedy of appeal.
3. Interpretation of Notification No. 202/88.
4. Method of computing aggregate value of clearances.
5. Violation of Article 14 of the Constitution.

Detailed Analysis:

1. Exemption under Notification No. 1/93-C.E.
The petitioners sought exemption for their rerolled products under Notification No. 1/93-C.E., which is not available if the aggregate value of clearances exceeded Rs. 200 lakhs in the preceding financial year. The key dispute was about the method of computing the aggregate value of clearances, specifically whether clearances of goods exempted under Notification No. 202/88 should be included.

2. Alternative Remedy of Appeal
The court addressed the respondents' objection regarding the maintainability of the petition due to the availability of an alternative remedy under Sections 35 and 35B of the Central Excises and Salt Act, 1944. The court held that the existence of an alternative remedy is not an absolute bar to exercising powers under Article 226 of the Constitution, especially when the petitions involve interpretation of notifications and allegations of discrimination, which are beyond the appellate authorities' competence.

3. Interpretation of Notification No. 202/88
Notification No. 202/88 provided total exemption from duty on final products if two conditions were met: the inputs had suffered duty, and no credit of the duty paid on the inputs was taken under Rule 56A or Rule 57A. The court noted that the first condition was rendered ineffective by the deeming provision in the Explanation to the notification, which assumed duty was paid on all inputs unless proven otherwise. The court found that the second condition was intended to prevent double benefits but did not justify treating manufacturers opting for the Modvat Scheme differently.

4. Method of Computing Aggregate Value of Clearances
The court emphasized that the subsequent Notification No. 1/93 required excluding the value of clearances of goods exempted from the whole of duty while computing the aggregate value. The court held that the petitioners, who opted for the Modvat Scheme, should not be treated differently from those who claimed total exemption under Notification No. 202/88, as the resultant benefit under both schemes was essentially the same. The court directed the respondents to give the benefit of Notification No. 1/93 to the petitioners by excluding clearances of excisable goods exempted from duty but for which Modvat credits were taken.

5. Violation of Article 14 of the Constitution
The court rejected the argument that Notification No. 1/93 violated Article 14 of the Constitution by creating unreasonable classification among manufacturers. The court found that the differential treatment arose from a misinterpretation of the notification's language, not from the notification itself. Therefore, there was no basis to quash Notification No. 1/93 on grounds of discrimination.

Conclusion
The court allowed the petitions, directing the respondents to extend the benefit of Notification No. 1/93 to the petitioners and others who opted for the Modvat Scheme. The court quashed the adjudication orders impugned in the petitions and instructed the 3rd respondent to re-compute the aggregate value of clearances in light of the court's interpretation.

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