1988 (9) TMI 213 - AT - Central Excise

Summary

Issues: Appeal against order demanding duty and imposing penalty under Central Excise Rules for opting out of Modvat Scheme before the end of the financial year.

Analysis:
1. Issue: Duty demanded and penalty imposed for opting out of Modvat Scheme.

The appellant opted for the Modvat Scheme but later sought to withdraw from it before the end of the financial year. The Additional Collector of Central Excise demanded duty and imposed a penalty for clearing goods without payment of duty under exemption Notification No. 175/86. The main issue is whether the appellants could legally opt out of the Modvat Scheme once they had chosen to work under it.

2. Legal Arguments:

The appellant's counsel argued that there is no legal bar for a manufacturer to opt out of the Modvat Scheme during a financial year, as per Rule 57A to Rule 57J of the Central Excise Rules. Reference was made to a previous Tribunal order supporting this view. The Department itself issued a clarificatory Trade Notice allowing manufacturers to opt out of the Modvat scheme in the same financial year. Therefore, it was contended that the duty demanded and penalty imposed were not valid in law.

3. Tribunal's Decision:

The Tribunal considered the legality of opting out of the Modvat Scheme before the end of the financial year. It was observed that the Modvat Scheme rules do not restrict a manufacturer from opting out at any point during the financial year. The Tribunal's previous order and the Department's clarificatory Trade Notice supported this interpretation. The Tribunal held that the duty demanded and penalty imposed were not legally justified. Consequently, the impugned order was set aside, and the appeal was allowed.

4. Conclusion:

The Tribunal's decision clarified that manufacturers can opt out of the Modvat Scheme at any time during the financial year as there is no legal restriction in the Central Excise Rules. The judgment emphasized the importance of following the rules and regulations governing such schemes and highlighted the need for clarity in interpreting and applying these provisions.