1998 (2) TMI 306 - AT - Central Excise

Summary

Issues:
1. Denial of modvat credit for biscuits manufactured under different brand names.
2. Requirement of fresh declaration after crossing the exemption limit.
3. Interpretation of Notification 175/86 regarding exemption eligibility for branded products.

Analysis:
The appeal before the Appellate Tribunal arose from an order-in-appeal passed by the Collector (Appeals) Central Excise, Allahabad. The appellants, engaged in biscuit manufacturing, were registered as a Small Scale Industries Unit and were availing modvat benefit on inputs under Rule 57G until 31-5-1992. The issue was that they availed modvat credit for different brand biscuits without filing a fresh declaration after crossing the exemption limit specified in Notification 175/86. The Collector (Appeals) upheld the denial of exemption and modvat credit, stating that the balance of credit lapsed when the appellants opted out of the modvat facility. He also held that exemption was not available for biscuits under other brand names not registered under Small Scale Industries. The appellants argued that they were entitled to opt out of the modvat scheme and exemption at any time with prior intimation. They cited precedents where fresh declarations were not required when crossing exemption limits and modvat credit was availed. The Department contended that the appellants were not eligible for exemption on branded products and wrongly availed modvat credit without filing a proper declaration.

The Tribunal considered the facts and submissions of both parties. It noted that the appellants initially intended to avail small scale exemption but later opted for modvat credit upon realizing their clearances exceeded the exemption limit. The Tribunal referred to precedents where fresh declarations were not necessary when crossing exemption limits and modvat credit was to be availed for the same inputs and final products. It emphasized that procedural lapses should not hinder substantial rights. The Tribunal found that the modvat credit denial was solely based on the failure to file a fresh declaration, which was not a valid reason. Additionally, the Tribunal interpreted Notification 175/86, stating that the value of clearances under another brand name not eligible for exemption should be excluded. As the appellants were manufacturing biscuits under a registered brand name and paying duty regularly, the value of such goods should not be considered for exemption calculation. Therefore, the Tribunal accepted the appellant's contention and allowed the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the denial of modvat credit was unjustified, and the requirement of a fresh declaration after crossing the exemption limit was not applicable in this case. The interpretation of Notification 175/86 supported the exclusion of goods manufactured under a registered brand name from the exemption calculation.