2004 (11) TMI 112 - SC - Central Excise

Assessee may decline Notification No. 53/88 exemption to claim Modvat/Cenvat credit; revenue appeal dismissed, no revenue implication

SC upheld the Tribunal's ruling that an assessee need not be bound to take an exemption under Notification No. 53/88 and may forgo it to claim ... CENVAT Credit - Exemption Notification No. 53/88 - Whether an assessee is bound to avail of exemption or can forgo the same in order to avail Modvat credit - Held that:- Apart from the question whether the Department ought to be allowed to question the decision of the Tribunal when the Tribunal had merely relied upon its earlier decision which decision has not been challenged by the Department, we are of the view that there is no necessity to interfere with the decision of the Tribunal in view of the fact that it is the admitted case as stated in the special leave petition, that the issue is merely technical and that there was no revenue implication - Decided against Revenue. Issues: Whether an assessee is bound to avail of exemption or can forgo the same in order to avail Modvat credit.Analysis:1. The case revolves around the question of whether an assessee is obligated to utilize an exemption or has the option to forgo it in order to benefit from Modvat credit. The respondent-assessee in this case chose not to avail of an exemption granted under a specific notification, based on a trade notice allowing such flexibility issued by the Central Excise and Customs Collector.2. Subsequently, the trade notice allowing the option to forgo exemption was withdrawn, mandating the assessee to avail of the exemption if the goods were fully exempted from duty payment. A show cause notice was issued to the respondent for recovery of the Modvat credit utilized by the assessee, leading to a dispute regarding the assessee's entitlement to the credit.3. The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) reversed the Department's decision, citing the assessee's right to choose not to avail of the exemption and pay duty to access Modvat credit. The Department challenged this decision, questioning the Tribunal's reliance on its earlier decision without challenging it directly.4. The Supreme Court, after considering the technical nature of the issue and the absence of any revenue implications, upheld the Tribunal's decision, dismissing the appeals by the Department without costs. In a similar case, the Court dismissed an appeal concerning Modvat credit availed by the respondent, emphasizing that any potential revenue impact would be neutral.5. The judgments highlight the importance of understanding an assessee's rights regarding exemptions and Modvat credits, emphasizing the need for clarity in trade notices and notifications to avoid disputes and ensure compliance with excise duty regulations.