Modvat credit and small-scale exemption can coexist when claimed for different goods under separate clearances.

A manufacturer could claim Modvat credit on inputs used for branded goods and still avail small-scale industry exemption under Notification No. 175/86-C.E. for clearances of goods manufactured under its own brand name. The notification contained no express prohibition against exemption merely because Modvat credit had been taken for a separate category of goods on which full duty was paid. Because the two claims related to different sets of goods, they were not mutually exclusive. The exemption and credit were therefore held capable of being claimed simultaneously, and the Revenue's challenge failed.

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Issues: Whether a manufacturer could simultaneously claim Modvat credit on inputs used in branded goods and exemption under Notification No. 175/86-C.E. in respect of clearances of goods manufactured under its own brand name.

Analysis: The notification contained no express bar preventing an assessee from availing the small scale industry exemption merely because Modvat credit had been taken in relation to separate branded goods on which full duty had been paid. The two claims related to different sets of goods and were not mutually destructive. The Commissioner (Appeals) was therefore right in holding that the exemption could be claimed alongside Modvat credit.

Conclusion: The simultaneous availment of Modvat credit and exemption under Notification No. 175/86-C.E. was permissible, and the Revenue's challenge failed.

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