1993 (2) TMI 195 - AT - Central Excise

Summary

Issues:
- Entitlement to higher notional credit in respect of special excise duty post-amendment of Notification 175/86.

Analysis:
The appeal before the Appellate Tribunal CEGAT, BOMBAY involved the issue of whether the respondents were entitled to claim higher notional credit in respect of special excise duty following the amendment of Notification 175/86. The East Regional Bench had previously considered this issue and held that higher notional credit for special excise duty cannot be claimed. However, the Collector (Appeals) had allowed the appeal of the respondents, leading to the department appealing against this decision.

Shri Mondal, representing the Revenue, relied on previous decisions to support the appeal. He highlighted that the amended notification limited the maximum extent of higher notional credit to 5%, regardless of whether it pertained to basic duty or special excise duty. Therefore, if the respondents had paid duty at 5% basic and 0.25% special excise duty, they could only claim a benefit up to 10.25% as per Notification 175/86, not the 10.5% they claimed. On the other hand, Shri Sindhi, representing the respondents, argued that the special excise duty should also be eligible for higher notional credit, citing specific points from the Finance Act 1988.

After considering both arguments, the Tribunal concluded that special excise duty is indeed eligible for Modvat credit, and the government had allowed for a higher notional credit under Rule 57B for inputs received from the small scale sector. However, the maximum extent for such credit was specified at 5% ad valorem in the amended Notification 175/86. The Tribunal emphasized that the issue was not about denying credit for special excise duty paid but about claiming higher notional credit, which was limited to the maximum of 5%. Therefore, the Tribunal upheld the appeal of the Revenue, stating that the respondents could only claim higher notional credit up to 5% and not beyond that, as per the relevant provisions.

In conclusion, the Tribunal allowed the appeal of the Revenue, emphasizing that the maximum extent of higher notional credit for special excise duty, as specified in the amended Notification 175/86, was limited to 5% ad valorem. The decision clarified that while special excise duty is eligible for Modvat credit, the higher notional credit was subject to the prescribed ceiling, and the respondents could not claim credit beyond the specified limit.