1998 (11) TMI 238 - AT - Central Excise

Tribunal upholds benefit extension to plastic manufacturers, allows Modvat credit

The Tribunal upheld the extension of the benefit of Notification 175/86 to manufacturers of plastic articles, ruling that the respondents were entitled to ... S.S.I exemption Issues:1. Extension of benefit of Notification 175/86 to manufacturers of plastic articles.2. Entitlement to Modvat credit on plastic sheets used in manufacturing final products.Analysis:Issue 1: Extension of benefit of Notification 175/86 to manufacturers of plastic articlesThe appeals were filed by the Revenue against the order of the Collector of Central Excise (Appeals), Ahmedabad, regarding the extension of the benefit of Notification 175/86-C.E. dated 1-3-1986 to the respondents who are manufacturers of plastic articles. The Tribunal examined the clarification issued by the Ministry of Industry, Department of Industrial Development, stating that a small scale unit includes a small scale ancillary industry within the prescribed investment limit. The Tribunal referred to previous cases to support the view that ancillary units are also considered small scale industries for the purpose of availing exemptions. It was held that the respondents were entitled to the benefit of exemption under Notification 175/86 as they were a registered small scale ancillary unit during the relevant period. Consequently, the impugned order was upheld, and the Revenue's appeals were rejected.Issue 2: Entitlement to Modvat credit on plastic sheets used in manufacturing final productsRegarding the cross objections, the Tribunal considered previous judgments to determine the eligibility for Modvat credit. In the case of C.C.E. v. SAIL, it was established that Modvat credit is admissible to an assessee who opts to pay duty on goods fully exempt for use in manufacturing the final product. Similarly, in the case of Facit Asia v. C.C.E., it was held that job workers were eligible for credit on duty paid for the final product, even if they could have chosen exemption under a notification. The Tribunal also referred to the case of Garg Industries v. C.C.E., where Modvat credit was allowed when the assessee paid duty instead of availing exemption, emphasizing that exemption is optional. Consequently, the Tribunal ruled that the respondents had the option to pay duty on finished goods and avail Modvat credit, not being liable to pay duty on intermediate products, as the final products, although exempt under Notification 53/88, were actually subject to duty. As a result, the cross objections were allowed.In conclusion, the Tribunal upheld the extension of the benefit of Notification 175/86 to the respondents and allowed them to avail Modvat credit on duty paid for finished goods, rejecting the Revenue's appeals and accepting the respondents' cross objections.