1996 (4) TMI 266 - AT - Central Excise

Summary

Issues:
- Whether Modvat credit can be availed in respect of one commodity while availing full exemption in respect of another commodity under Notification No. 175 of 1986-C.E.

Analysis:
1. The appeal was filed by the Department against the Order-in-Appeal passed by the Commissioner (Appeals), Customs and Central Excise, Ghaziabad. The issue at hand was whether the assessee could avail Modvat credit for one commodity while enjoying full exemption for another commodity under Notification No. 175 of 1986-C.E. The Assistant Collector denied Modvat credit, stating that exemption under Notification No. 175/86 for one input precluded the use of Modvat credit for another input. However, the Commissioner (Appeals) allowed Modvat credit, citing that since the items were under different headings, Modvat credit could not be denied, following a precedent set by the Tribunal in a previous case.

2. The Departmental Representative argued that Modvat credit could not be availed for one item while enjoying Small Scale Industries (SSI) exemption for another, referencing a Tribunal case and a Larger Bench decision affirming this position. The Larger Bench had ruled that Modvat credit was not permissible while availing SSI exemption, contrary to the Commissioner (Appeals)'s decision. The Department contended that the Commissioner erred in accepting the appellant's plea based on the Tribunal's previous decisions.

3. The Tribunal examined the submissions and referred to a case where it was established that Modvat credit could be claimed while availing SSI exemption for other commodities, citing several earlier decisions. The Tribunal also noted that a case involving a similar issue had been appealed to the Supreme Court, which upheld the Tribunal's decision, allowing Modvat credit in certain circumstances. Based on these precedents, the Tribunal upheld the Commissioner (Appeals)'s decision, stating that the appellant was entitled to Modvat credit for wired chassis despite claiming exemption for tape recorders, as they fell under different headings. Consequently, the Tribunal dismissed the Department's appeal.