One-time exemption option under Notification No. 1/93-C.E. bars switching from duty payment with Modvat credit to full exemption mid-year.

Under Notification No. 1/93-C.E., a manufacturer's choice not to avail exemption and instead pay duty at the applicable rate is exercisable only once in a financial year. Once that option is exercised, the manufacturer remains bound to pay duty on subsequent clearances in that year and cannot later switch to total exemption. The commentary notes that the insertion of paragraph 5 by Notification No. 59/94-CE reinforced this restriction on changing between duty payment with Modvat credit and exemption during the same year. On that basis, a manufacturer that had opted to pay duty from 1-4-1995 and taken Modvat credit could not later claim full exemption for the remaining clearances in the same financial year.

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Issues: Whether a manufacturer who had initially opted to pay duty and avail Modvat credit under Notification No. 1/93-C.E. could later switch to total exemption under the same notification during the same financial year.

Analysis: Paragraph 5 of Notification No. 1/93-C.E. gives the manufacturer an option not to avail the exemption and to pay duty at the applicable rate, but the option is exercisable only once in a financial year. Once that option is exercised, duty liability continues for all subsequent clearances made after the date of option in that financial year. The insertion of paragraph 5 by Notification No. 59/94-CE reinforced the restriction on changing between duty payment with Modvat credit and exemption during the year. Since the assessee had already opted to pay duty from 1-4-1995 and taken Modvat credit, it could not later opt out and claim total exemption for the remaining clearances in that financial year.

Conclusion: The assessee was not entitled to switch from duty payment with Modvat credit to total exemption during the same financial year, and the demand was rightly confirmed.

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