TMI Blog2014 (4) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 disadvantageo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise (Appeals) vide his order dated 15.09.1995 denied Modvat credit to the tune of Rs. 3,16,095/- in the case of Grand Cord Industries and Rs. 9,01,754/- in the case of M/s Jhunsons Chemicals. The authorities held that an Assessee being covered under the said exemption notification had no option and the Modvat credit was not admissible under Rule 57C. 6. The Assessee/Respondents filed appeals before the Customs Excise and Gold (Control) Appellate Tribunal. The Tribunal vide order dated 03.03.1998 following their earlier decisions in the case of Everest Convertors Vs Collector 1995 (80) ELT 91 and other earlier decisions allowed the appeals and held that the Assessee cannot be denied the benefit of Modvat credit of duty paid on inputs used in the manufacture of final products on which duty was paid, though the final product would be exempt from duty under an exemption notification issued under section 5A(1), since it was for the Assessee to claim the concession. It was further held that if the Assessee does not claim the benefit of the notification its benefit will not automatically extend to him. Nor can the benefit be forced on him. Where the Assessee had chosen not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions. 11. Rule 57C of the rules however stipulates that no credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product was exempt from the whole of the duty of excise leviable thereon or was chargeable to nil rate of duty. 12. The Supreme Court of India in ICHALKARANJI MACHINE CENTRE (P) LTD. V. CCE, (2005) 1 SCC 465, AT PAGE 468 has laid down as under: 9. MODVAT is basically a duty-collecting procedure, which aims at allowing relief to a manufacturer on the duty element borne by him in respect of the inputs used by him. It was introduced w.e.f. 1-3-1986. The said Scheme was regulated under Rules 57-A to 57-J of the Central Excise Rules, 1944. Rule 57-A entitled a manufacturer to take instant credit of the Central excise duty paid on the inputs used by him in the manufacture of the finished product, provided that the input and the finished product were excisable commodities and fell under any of the specified chapters in the Tariff Schedule. Under Rule 57-G, every manufacturer was required to file a declaration before the jurisdictional Assistant Collector, declaring his intention to take MODVAT credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) in the case of first clearances of the specified goods up to an aggregate value not exceeding rupees thirty lakhs - (i) in a case where a manufacturer avails of the credit of the duty paid on the inputs used in the manufacture of the specified goods cleared for home consumption under rule 57A of the Central Excise Rules, 1994 (hereinafter referred to as the said Rules), from so much of the duty of excise leviable thereon which is specified in the said Schedule (read with any relevant notification issued under sub-rule (1) of Rule 8 of the said Rules of sub-section (1) of Section 5A of the said Act, and in force for the time being] as is equivalent to an amount calculated at the rate of 10 per cent ad valorem (ii) in any other case from the whole of the duty of excise leviable thereon. 15. The Notification has been issued for the benefit of the registered SSI Units enabling them to clear goods upto a certain value without payment of excise duty. The notification granting limited exemption is available to SSI Units. The rationale behind the notification is apparently to promote Small Scale Industries and encourage and make the products manufactured attractive, competitive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CTT {2009 2 SCC 90}, this Court has held: (SCC pp. 101-02, para 29) 29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries {2005 (1) SCC 657} (SCC para 26); TISCO Ltd. v. State of Jharkhand {2005 (4) SCC 272} (SCC paras 42-45); State Level Committee v. Morgardshammar India Ltd. {1996 (1) SCC 108}; Novopan India Ltd. v. CCE Customs{1994 Supp (3) SCC 606}; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala {2007 (2) SCC 725} and Reiz Electrocontrols (P) Ltd. v. CCE. {2006 (6) SCC 213}] 18. 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 Rs.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. 19. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take/avail of benefits of that notification which was more beneficial to it. 24. In the present case the 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. 25. The 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. 26. The Respondents have only sought to forego the benefits of the exemption notification available to SSI units. 27. The 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. 28. The reference is thus answered in favour of the Assessee and against the revenue. 29. There shall be no orders as to costs. - - TaxTMI - TMITax - Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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