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2014 (4) TMI 258 - HC - Central ExciseOption for payment of duty - SSI Exemption - Whether the option is available to the Assessee either to avail the exemption or to pay duty on the final product by taking modvat credit on inputs in terms of Rule 57A of the Central Excise Rules, 1944 - The stand of the Revenue that since the respondent was a SSI Unit and covered under the Notification No.1/93 and clearance of goods upto a value of ₹ 30 lakhs was exempted from payment of duty, the benefit of MODVAT scheme could not be availed in terms of Rule 57C is counter–productive and not beneficial for the respondent Assessee. It works against them and makes them in-competitive and places them at a disadvantage. Held that:- The object of the MODVAT Scheme is to reduce cost of final product by taking credit for the duty paid on the inputs - The object of the Exemption notification is to grant benefit to the SSI Units for clearing goods without payment of duty upto a particular limit - Both the MODVAT scheme and the exemption notifications are beneficial legislation. The beneficial notification have to be strictly initially but liberally interpreted. If the interpretation of the Revenue is to be accepted that there was no choice to SSI Units to either avail the MODVAT Scheme or the benefit of the exemption notification, then the SSI units are prejudiced and may even become unviable. The purpose of the MODVAT Scheme is to prevent and neutralise cascading effect of the duty paid on inputs. If the interpretation of the revenue is accepted then a manufacturer not registered as a SSI unit would be entitled to benefit of the MODVAT scheme for unlimited value and pass on benefit to the purchaser. But an SSI unit covered by the exemption notification would not be entitled to the benefit of the MODVAT scheme but would be entitled to clear goods at nil duty or lesser duty only upto a limit. Because he cannot pass on the MODVAT credit, to the purchaser, he is denied a level playing field and suffers disadvantage. This clearly is not the purpose behind the MODVAT scheme and the exemption notification. Manufacturers are admittedly covered both under the MODVAT Scheme and the exemption notification, if the right to chose is not granted then it would be disadvantageous for a manufacturer to get itself registered as a SSI unit. This would thus be to the detriment of the manufacturer to register as a SSI unit. This consequence is clearly not intended by the legislature/Rule - Respondents admittedly have not claimed or availed of any benefit under the exemption notification but have sought to claim benefit of only the MODVAT Scheme as was available to other manufacturers - Respondents have only sought to forego the benefits of the exemption notification available to SSI units - Assessee in our view would have the option either to avail the exemption under the exemption notification or to pay duty on the final product by taking MODVAT credit on inputs in terms of Rule 57A of the Rules. - Decided against Revenue.
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