Modvat opt-out rights cannot be curtailed by circulars when the statutory rules permit withdrawal within the same year.

A manufacturer who had opted for Modvat under the Central Excise rules was held entitled to withdraw from the scheme during the same financial year and switch to the small-scale exemption, because the rules themselves contained no prohibition against such opting out. The court noted that the only restriction came from a trade notice or circular, and an administrative instruction cannot curtail a right not denied by the statutory scheme. It further applied the principle that there can be no estoppel against statute, so a circular inconsistent with the rules could not control the scheme. The demand notices based on the contrary view were quashed.

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Issues: Whether a manufacturer who had once opted for Modvat under the statutory scheme could opt out of the scheme during the same financial year and switch over to the small-scale exemption, and whether a trade notice or circular could restrict that statutory choice.

Analysis: The relevant Central Excise Rules governing Modvat contained no prohibition against opting out during the same financial year after having opted in. The restriction was found only in a trade notice / circular of the Board. A circular or trade notice cannot curtail a right not prohibited by the statutory scheme itself. There can be no estoppel against statute, and an administrative instruction inconsistent with the rules cannot control the operation of the scheme.

Conclusion: The manufacturer was entitled to opt out of Modvat during the same financial year. The demand notices founded on the contrary view were unsustainable and were quashed, in favour of the assessee.

Ratio Decidendi: An administrative circular or trade notice cannot restrict a statutory entitlement under the Modvat rules, and a manufacturer is not barred from opting out of the scheme within the same financial year when the rules do not prohibit such withdrawal.

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