Modvat declaration alone does not forfeit Small Scale Unit exemption under Notification No. 175/86 when credit is not actually taken.

Mere filing of a Modvat credit declaration, without actually availing Modvat credit, does not by itself disqualify a Small Scale Unit from the benefit of para 1(a)(ii) of Notification No. 175/86. The Tribunal followed its earlier view that the decisive factor is actual availment of Modvat credit, not the filing of the declaration alone. Since the assessee had not taken Modvat credit and had paid duty at the concessional rate, the exemption benefit remained available under the notification.

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Issues: Whether mere filing of a Modvat credit declaration, without availing Modvat credit, disentitles a Small Scale Unit from the benefit of para 1(a)(ii) of Notification No. 175/86 when duty has been paid at the concessional rate.

Analysis: The Tribunal noted that the assessee had filed a Modvat declaration but had not actually taken Modvat credit, while paying duty at the concessional rate. It followed its earlier decisions holding that filing of the declaration alone does not forfeit the exemption benefit under Notification No. 175/86, and that the decisive factor is whether Modvat credit was in fact availed.

Conclusion: Mere filing of a Modvat credit declaration did not disentitle the assessee from the benefit of Notification No. 175/86. The issue was decided in favour of the assessee.

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