Judgment:
1. The appellants herein purchased PVC resin falling under Heading 39.04 of the Central Excise Tariff Act, 1985. PVC file/sheet are manufactured by using such resin. Some quantity of PVC film is captively consumed within the factory for manufacturing laminated cotton fabrics. PVC film captively consumed within the factory is eligible for exemption under Notification No.271/86. However, the assessee did not avail of the benefit of this Notification but paid excise duty applicable PVC film and duty so paid was taken as modvat credit and utilised for payment of duty on the final product viz.
laminated fabrics falling under Chapter heading 59.03. The duty paid on PVC resin purchased from the market was taken as modvat credit and utilised for payment of duty on PVC film. Modvat declaration was filed showing PVC resin as input and PVC film as final product. Another modvat declaration was filed indicating PVC film as input and laminated fabrics as final product. Notification No.10/89(NT) was issued amending Notification No.177/86. Under this Notification, a separate RG.23 account was required to be maintained in respect of stock of inputs falling under heading 39.04. It also stipulated that the credit of duty paid thereon and utilised for payment of duty on goods falling under heading 59.03 should not exceed an amount calculated at Rs. 5.50 per sq.mtrs.of laminated fabrics ie. the final product. 5 show cause notices were issued by the Department proposing recovery of duty by way of disallowing modvat credit taken on the ground that PVC films were exempted from payment of duty for captive consumption under Notification No. 217/86. One more show cause notice dated 29.4.94 was issued for the period 1.3.1989 to June, 1992 by which credit taken on PVC resin and utilised in excess of the amount stipulated under Notification No. 177/86 was sought to be disallowed and recovered. The Commissioner of Central Excise confirmed the duty demands under Show cause notices. In addition to this, he has also imposed penalty of Rs. 50 lakhs. Hence, this appeal.
2. We have heard Shri Sridharan, counsel for the appellants and Shri Sarkar, JDR for the department.
3. The question as to whether an assessee has an option either to pay duty and avail of modvat credit or avail of the benefit of exemption notification has been settled by various decisions of the Tribunal. One such decision placed before is in the case of the same assessee (Order No.C-I/4223/WZB/2000 dated 6.12.00). The Tribunal has held that the assessee was entitled to pay duty and take credit and was not bound only to avail of benefit of exemption under the Notification.
Therefore, as far as show cause notices dated 15.6.94, 3,10.94, 10.6.93 and 20.12.93 are concerned, we hold that the demands are not sustainable.
4. In so far as the last show cause notice is concerned, the contention of the appellant is that the demand is barred by limitation since there was no suppression on their part. We find that the Commissioner in his order has held that the intention of the assessee was to avail ineligible credit in excess of what was available to them by way of suppressing facts. However, we are not able to see the logic in this conclusion as the material on record shows that there is substantial compliance on the part of the appellant regarding availment of credit in excess of amount calculated at Rs. 5.50 per sq.mtrs of laminated fabrics. Therefore, it cannot be said that the appellant has suppressed the material facts. They also filed necessary classification for PVC film captively consumed in which they have indicated the duty paid by them. We, therefore, hold that the notice dated 29.4.94 is barred by limitation.
5. In the result, the demands and penalty are set aside after setting aside the impugned order. Appeal thus allowed.