2013 (2) TMI 193 - HC - Central Excise

Notification No. 16/97/CE dated 01.04.1997 - Whether the appellant had validly exercised the option given in the notification - appellant was availing Cenvat credit in respect of clearances of its final products (electrical equipments) - Held that - As in the order dated 11.01.2013 itself it was indicated that the appellant had not exercised the option validly as he has availed Cenvat credit which would not have been availed of in respect of those clearances after having exercised the option. The option was still-born and, therefore, the appellant could not have taken advantage of the notification dated 01.04.1997. Tribunal was in error in assuming that this was a case of withdrawal of an option. It was not a case of withdrawal, but it was a case of an option which had not been validly exercised, in the first instance. It is no doubt true that an option once exercised under the said notification, could not be withdrawn for the entire period of the financial year during which that option is exercised but, as mentioned above, this is not a case of withdrawal of an option. On the contrary, it is a case of the option itself being ineffective from its inception. This being the position, if the appellant has taken any advantage of the notification, that advantage would have to be reversed & appellant s case would, therefore, have to be governed outside the said notification for the entire financial year 1997-98. The department shall make the computation, as the appellant is willing to pay the amount as per the record of clearances & appellant shall file the requisite documents for the purposes of computation within four weeks from today.

Summary

Issues:
1. Valid exercise of option under Notification No. 16/97/CE dated 01.04.1997.
2. Consequences of invalid exercise of the option.

Analysis:
Issue 1: Valid Exercise of Option
The High Court examined whether the appellant had validly exercised the option provided in Notification No. 16/97/CE dated 01.04.1997. The Court found that the appellant had not validly exercised the option as it was done after effecting the first clearance in the financial year 1997-98. The Court clarified that the option was still-born, rendering it ineffective from the beginning. It was emphasized that this was not a case of withdrawal of the option, but rather an instance of the option being defective. The Court highlighted that once an option is exercised under the notification, it cannot be withdrawn for the entire financial year. Consequently, any benefit obtained through the notification needed to be reversed, and the appellant's case would be governed outside the notification for the entire financial year 1997-98.

Issue 2: Consequences of Invalid Exercise of Option
Given the invalid exercise of the option, the Court directed that any advantage gained by the appellant through the notification had to be reversed. The appellant was instructed to pay the requisite amount as per the record of clearances, outside the purview of the notification. The department was tasked with computing the amount owed, and the appellant was given four weeks to submit the necessary documents for computation. Once the computation was completed, the appellant had six weeks to pay the determined amount. The Court specified that the dispute pertained only to the first four months of the financial year 1997-98. Consequently, the appeal was allowed to the extent outlined in the judgment.