1997 (11) TMI 246 - AT - Central Excise

Summary

Issues:
Whether an assessee has the choice to opt for Modvat credit when eligible for exemption under Notification No. 1/93 as amended.

Detailed Analysis:
The appeal in question arose from an Order-in-Appeal passed by the Collector of Central Excise (Appeals), Delhi, regarding the choice available to an assessee to opt for Modvat credit when eligible for exemption under Notification No. 1/93 as amended. The appellants, engaged in manufacturing excisable goods, were served with a show cause notice (SCN) for wrongfully availing Modvat credit during a specific period. The lower authorities held against the appellants, leading to the appeal. The dispute centered around whether unregistered units could avail of the exemption under Notification No. 1/93 up to a certain limit without being compelled to operate under the said Notification or being denied the option to pay duty and claim Modvat credit. The appellants argued that they had the option to choose between the exemption and the Modvat Scheme, citing previous tribunal decisions in support of their stance.

The Deputy Collector, in the initial adjudication proceedings, held that once goods were fully exempted from payment of duty under a notification like Notification No. 1/93, a manufacturer had no option to pay duty, and any amount paid would be treated as a deposit, precluding the availment of Modvat credit. The Deputy Collector also emphasized that Rule 57C disallowed credit of specified duty on inputs if the final product was exempted from duty, regardless of whether duty was actually paid on the final product. The Order-in-Appeal upheld this view, relying on a judgment from the Andhra Pradesh High Court and rejecting the appellants' argument regarding the availability of the option to avail the benefit of the Notification or the Modvat Scheme.

In the final decision, the Tribunal referred to various tribunal decisions, including Everest Convertors, Gothi Plastic Industries, Mechiv Engineers, and Prominent Plastic Industries, to establish that an assessee had the option to choose between an exemption notification and the Modvat Scheme. The Tribunal emphasized that exemption notifications could not be forced upon an assessee, and the assessee had to claim the concession to benefit from it. In the case at hand, where the appellants were not registered for the Notification's benefits, they were not compelled to operate under it and could choose to pay duty on inputs and claim Modvat credit. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellants as per the law.

In conclusion, the judgment clarified that an assessee has the option to choose between an exemption notification and the Modvat Scheme, emphasizing that exemption notifications cannot be forced upon an assessee. The Tribunal ruled in favor of the appellants, holding that they were not compelled to operate under the Notification and could opt to pay duty on inputs and claim Modvat credit, thereby allowing the appeal and providing consequential benefits to the appellants.