TMI Blog1989 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1985. By the Finance Act, 1986 the scheme of credit for inputs used for the manufacture of excisable goods were introduced which was known as Modified Value Added Tax (referred to as MODVAT). Under the MODVAT SCHEME while making payment of excise duties of finished products the excise duty levied on the materials used by the manufacturers are adjusted, or in other words, if any duty is paid on the materials used in the manufacturing process, in that event, while making payment of excise duty on the end-product, the duty which is already paid in respect of those materials are deducted, or in other words some reliefs are given to the manufacturers. The petitioner opted for the MODVAT Scheme instead and place of benefit available to the petitioner as a small scale industrial unit. The petitioner filed declaration in this regard on 30th March, 1987 in accordance with 57-O(1) of the Central Excise Rules in prescribed manner indicating the description of final product manufactured in the factory and inputs intended to be used in respect of the final product and on from 1st April, 1988 the petitioner availed of the benefit of the credit of duty paid on the inputs received by it fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any time from the said MODVAT Scheme and that the restriction contained in the circular that the person who intends to opt in the said scheme, cannot be allowed to be opted out within the financial year was ultra vires the provision of Central Excises Salt Act, 1944 and/or the Central Excise Rules, 1944 and of the Constitution of India. 5. It is stated that the petitioner voluntarily opted under MODVAT Scheme on and from 1st April, 1987 in terms of Notification No. 177/86 dated 31st March, 1986 in preference to the benefit that it was available of as a small scale industrial unit and that under the circular and/or classification issued by the Central Government in this behalf, once a manufacturer opts in for paying duty under the MODVAT Scheme at the beginning of the financial year in respect of any specified goods, the said manufacturer will have no option to go out from MODVAT Scheme within the financial year, is at liberty to opt out only in the next financial year or in other words, once the manufacturer intends to take the advantage of the MODVAT Scheme for entire financial year and within that period he is not given liberty to opt out who shall do so at the very beginning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the option by the manufacturer to operate under MODVAT Scheme should be given only at the beginning of the financial year or that once having opted to come under that Scheme he can choose to go out of it only at the end of the financial year. It is also noted that this position has since been recognised by the department itself as reflected in the clarificatory trade notice referred to by the learned counsel, with the stipulation, rightly, that the value of clearances under MODVAT Scheme should also be included for determining the aggregate value of clearances under Notification No. 175/86 dated 1-3-1986. In view of the position, the impugned order is set aside and the appeal allowed." 7. In the said clarificatory Trade Notice No. 42/GL-64/CE/MODVAT/ CAL/II/88 dated 24th June, 1988 it was stated that :- "It has been decided that a manufacturer may be permitted to opt out of MODVAT in the same financial year. However, for the purpose of computing the aggregate value of clearance made under Notification No. 175/86-C.E., dated 1-3-1986 during the said financial year, the value of clearance effected under MODVAT should also be included for determining the aggregate value of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by the Tribunal in the aforesaid judgment that there is no law imposing prohibition in such matter. The Scheme has to be interpreted in a manner which is consistent to spirit of such scheme. The Court seeks to avoid a construction that causes unjustifiable inconveniences to persons subject to such notification and it is not a case of evasion or avoidance of liability to pay excise duty. The question whether the petitioner could enjoy benefit as small scale industry or enjoy benefit under the MODVAT Scheme, is entirely a matter for the petitioner to decide and in my view, if the petitioner is allowed to opt out it will not cause any loss to revenue or the Revenue would not be inconvenienced in any manner whatsoever. Under such circumstances, I am not inclined to accept the Revenue's contention. The scheme is nothing more than granting certain concessional benefit, and it can not be said that the petitioner who wants to take a benefit, should continue to accept the benefit for a particular and fixed period of time. That is not the scheme or the spirit of such scheme. The authorities concerned realised this difficulty and thereafter had come out with the clear trade notice perm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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