2004 (5) TMI 197 - AT - Central Excise

Summary

Issues:
- Appeal against Order-in-Appeal passed by Commissioner (Appeals), Hyderabad regarding exemption under Notification No. 1/93-C.E.
- Validity of opting for availing Modvat credit and SSI benefit.
- Interpretation of the option to avail exemption during the financial year 1996-97.
- Imposition of penalty and differential duty on clearances made between specific dates.
- Dispute over payment of duty at normal rate on certain invoices.

Analysis:

The case involves a Revenue appeal against an Order-in-Appeal passed by the Commissioner (Appeals), Hyderabad, concerning the eligibility of assessees, who are manufacturers of printing inks, varnishes, reducers, and driers, for availing exemption under Notification No. 1/93-C.E. The assessees had opted for availing Modvat credit and were operating as a small scale industry. They filed a declaration under Rule 173B of Central Excise Rules to be effective from 1-4-1996 for the financial year 1996-97. The Commissioner (Appeals) noted that the assessees had opted to avail the exemption under the said notification, which was valid for the entire financial year 1996-97 unless another option was filed. The Commissioner emphasized that merely paying the normal rate of duty on a few invoices did not indicate a revision of the option to pay duty at the normal rate. Consequently, the Commissioner held that the assessees were eligible for the exemption, and the differential duty imposed on clearances during a specific period was not sustainable. A penalty was also imposed, which the Revenue sought to restore through the appeal.

During the hearing, the Senior Departmental Representative (SDR) argued that the assessees had initially availed the benefit of the notification but later switched to the normal rate of duty. The SDR contended that once the assessees started paying duty at a higher rate from a certain invoice, they were required to continue at that rate for all clearances until the end of the financial year 1996-97. On the other hand, the assessees maintained that they did not opt out of availing the concessional duty and had already refunded the differential amount ordered by the Commissioner (Appeals). They also cited a Tribunal judgment in support of their position.

Upon careful consideration, the Tribunal found that the Commissioner (Appeals) had thoroughly examined the issue and correctly concluded that the assessees had not opted out of the exemption notification during the financial year 1996-97. The Tribunal agreed with the Commissioner's assessment that the mere payment of the normal rate of duty on a few invoices did not signify a change in the option to avail the exemption. Therefore, the Tribunal rejected the appeal, upholding the decision that the assessees were entitled to the benefit under Notification No. 1/93-C.E. The Tribunal emphasized that the specific examination of facts by the Commissioner supported the finding that the assessees had chosen to avail the exemption, and paying a higher duty on some invoices did not alter this choice. Consequently, the appeal was dismissed, affirming the eligibility of the assessees for the exemption.