SSI exemption under alternative notification route upheld after Modvat reversal and undisputed eligibility for the unregistered unit.

Notification No. 1/93-C.E. provided different exemption routes depending on SSI registration, and Notification No. 84/93-C.E. enlarged the exemption limit for units not so registered. Where an unregistered small scale unit had initially opted for clause (1)(a)(i) under a mistaken belief, but later reversed Modvat credit and shifted to the alternative route, the Department could not insist on normal tariff duty if eligibility under clause (2) was otherwise undisputed. The assessee was entitled to the benefit of clause (2) of Notification No. 1/93-C.E., and the demand could not be sustained.

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Issues: Whether the assessee, an unregistered small scale unit, was entitled to the benefit of clause (2) of Notification No. 1/93-C.E. after initially opting for clause (1)(a)(i) and reversing Modvat credit.

Analysis: Notification No. 1/93-C.E. granted exemption on different terms depending on whether the factory was registered as an SSI unit. Notification No. 84/93-C.E. later enlarged the exemption limit available to units not so registered. The assessee had initially claimed the concessional route under clause (1)(a)(i) under a mistaken belief, but once the Department held that it was not eligible for that clause, the Department could not insist on normal tariff duty if the assessee was otherwise entitled to the alternative exemption under the same notification. The assessee had reversed the Modvat credit and opted for the alternative route, and the Department did not dispute eligibility under clause (2).

Conclusion: The assessee was entitled to the benefit of clause (2) of Notification No. 1/93-C.E., and the demand based on denial of that benefit could not be sustained.

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