Exemption under small-scale notification not compulsory; manufacturer could decline it and still resist denial of Modvat credit.

Notification No. 1/93-C.E. granted exemption subject to specified conditions, including availability to registered small-scale units, while also extending a limited benefit up to a clearance value of Rs. 10 lakhs to unregistered units. That limited extension did not make the exemption unconditional or compulsory. A manufacturer was therefore not required to mandatorily avail the exemption in every case, but had to satisfy the prescribed conditions before claiming it. The Revenue's argument that compulsory exemption availing would bar Modvat credit under Rule 57C was rejected, and the objection to credit failed.

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Issues: Whether a manufacturer eligible for exemption under Notification No. 1/93-C.E. was bound to avail the exemption and, if so, whether Modvat credit under Rule 57C of the Central Excise Rules, 1944 was unavailable.

Analysis: The exemption notification granted relief subject to specified conditions and contemplated availability to a registered small-scale unit, while also extending limited benefit up to a clearance value of Rs. 10 lakhs even where the unit was not so registered. This limited extension did not make the exemption unconditional. The notification did not compel its compulsory availing in every case, and the assessee was required to satisfy the prescribed conditions before claiming the benefit. The Revenue's contention that the exemption had to be mandatorily availed, thereby barring Modvat credit, was rejected.

Conclusion: The manufacturer was not bound to compulsorily avail the exemption, and the Revenue's objection to Modvat credit failed.

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