2002 (5) TMI 71 - HC - Central Excise

Summary

Issues:
Challenge to validity of order denying right to opt out of Modvat scheme during financial year and confirmed demand against petitioners.

Analysis:

Issue 1: Validity of order denying right to opt out of Modvat scheme during financial year and confirmed demand against petitioners
- The petitioners challenged the validity of an order passed by the Assistant Collector of Central Excise, Division VII, Bombay-1, which denied their right to opt out of the Modvat scheme during the financial year and confirmed a demand against them.
- The petitioners, a small-scale industry manufacturing aluminium collapsible tubes, had opted for the Modvat scheme to claim benefits available to them as a small-scale industry unit.
- The petitioners had availed Modvat credit in respect of inputs used in manufacturing their goods until a certain date, following which they decided to discontinue the benefit of the Modvat scheme.
- The Assistant Collector rejected the petitioners' contention that they should be allowed to opt out of the scheme during the same financial year, citing trade notices that did not permit such a changeover.
- The petitioners argued that there was no legal bar preventing a manufacturer from opting out of the Modvat scheme in the same financial year, relying on a judgment of the Calcutta High Court.
- The respondents contended that the scheme of exemption provided for an integrated method of computation of value of clearance made in a financial year and that once the option to avail benefits of the Modvat Scheme was exercised at the beginning of the financial year, opting out could only be permitted in the next financial year.
- The High Court held that there was nothing in the Central Excise Rules to indicate that a manufacturer cannot opt out of the Modvat scheme during the same financial year, and that any circular or trade notice contrary to the rules could not be legal and valid.
- The Court concluded that the petitioners were entitled to opt out of the Modvat Scheme, quashing the show cause-cum-demand notices issued against them.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the case and the High Court's decision.