1997 (1) TMI 343 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57C regarding exemption from duty of excise.
2. Application of Rule 57C in cases of goods cleared without availing exemption.
3. Applicability of explanatory notes to unregistered units.

Analysis:
The case involves a reference application under Section 35G of the Central Excises and Salt Act, 1944, concerning the alteration of the expression in Rule 57C and the questions of law arising from it. The primary issue is whether the Tribunal was correct in altering the expression in Rule 57C to allow a party to avail an option regarding exemption from duty of excise. The second issue is whether Rule 57C applies even when final products are cleared without availing the exemption. The third issue pertains to the applicability of the embargo laid down by Rule 57C in cases where final products are cleared on payment of duty. The Tribunal's final order set aside the duty demand imposed on the respondents, allowing them the option to avail SSI exemption or credit of duty under the Modvat Scheme.

The dispute arises from a show cause notice proposing recovery of duty availed during a specific period, alleging a violation of exemption provisions. The Tribunal held that the assessees had the option to avail SSI exemption or credit of duty under the Modvat Scheme, citing precedent. The contention revolves around Rule 57C, where the Department argues that exemption from duty creates a bar to availment of credit, regardless of the choice made by the assessees. The Department relies on a High Court decision to support this argument.

The opposing party argues that the issue has been settled in previous Tribunal cases, and no question of law requiring reference arises. However, the presiding judge finds that a legal question arises concerning the application of Rule 57C in cases where final products are cleared without availing exemption. This question has not been addressed by any High Court, necessitating a reference. The draft statement of reference includes questions regarding the application of Rule 57C in such cases and the applicability of explanatory notes to unregistered units. The matter is set for finalization before the Bench on a specified date.