1997 (7) TMI 338 - AT - Central Excise

Assessee's Option to Claim Modvat Credit Upheld by Tribunal

The Tribunal held that the assessee had the option to either avail of the exemption under Notification No. 1/93 or pay duty on the final product and claim ... Exemption of duty vis-a-vis Modvat scheme Issues Involved:1. Eligibility for Modvat credit under Rule 57C.2. Interpretation of Notification No. 1/93.3. Applicability of exemption options to SSI units.4. Distinction between product-based and unit-based exemptions.5. Precedent and consistency in Tribunal decisions.Issue-wise Detailed Analysis:1. Eligibility for Modvat Credit under Rule 57C:The appellants opted to pay duty on their final products and avail of Modvat credit on inputs, despite being eligible for an exemption under Notification No. 1/93. The department contended that Modvat credit could not be availed under Rule 57C if the final product was exempt from duty. The Tribunal noted that Rule 57C restricts credit only when the final product is exempt, but the exemption under Notification No. 1/93 was conditional and specific to SSI units, not universally applicable to all manufacturers.2. Interpretation of Notification No. 1/93:The appellants argued that Notification No. 1/93 provided an option to either avail of the exemption or pay duty and claim Modvat credit. They supported their argument with multiple Tribunal decisions, including the case of M/s. Everest Convertors, which held that the exemption notification could not be forced upon an assessee and that the option to avail of the exemption or pay duty lay with the assessee.3. Applicability of Exemption Options to SSI Units:The Tribunal emphasized that the exemption under Notification No. 1/93 was specific to SSI units up to Rs. 30 lakh and did not exempt the goods themselves. This distinction allowed the assessee the option to either avail of the exemption or pay duty and claim Modvat credit. The Tribunal reiterated that the option to choose between these benefits was with the assessee.4. Distinction Between Product-Based and Unit-Based Exemptions:The Tribunal distinguished the present case from the Andhra Pradesh High Court's decision in Ganesh Metal Processing Industries, where the exemption was product-based under Notification No. 202/88. In the present case, the exemption was unit-based, applicable only to SSI units, and not to the goods themselves. This distinction was crucial in determining the applicability of Modvat credit.5. Precedent and Consistency in Tribunal Decisions:The Tribunal relied on its consistent rulings in similar cases, affirming that the option to avail of the exemption or pay duty and claim Modvat credit lay with the assessee. The Tribunal cited several decisions, including M/s. Everest Convertors and J.B. Industries, which supported the appellants' position. The Tribunal concluded that the appellants' cases were fully covered by these precedents.Conclusion:The Tribunal held that the assessee had the option to either avail of the exemption under Notification No. 1/93 or pay duty on the final product and claim Modvat credit on inputs. The benefit of Modvat credit claimed by the assessee was legally sustainable, and the appeals were allowed with consequential relief in accordance with the law.