Full Judgment
2. The facts of the case in brief are that the appellants are engaged in the manufacture of DPC aluminium and copper wires. The appellants filed a classification list effective from 1-4-1993 stating that they will pay duty on the normal rates and avail Modvat credit. The appellants are not registered as a small scale unit with Directorate of Industries or Development Commissioner and their value of clearances for the previous financial year are less than Rs. 200 lakhs. The appellants were also not registered as DGTD unit. It was alleged that since the appellants were entitled to exemption under Clause 2 Para 1 of the Notification 1/93 as amended by Notification 84/93 and nil rate of duty was applicable in their case therefore they were not entitled to Modvat credit on the inputs in terms of Rule 57C of the Central Excise Rules, 1944. The Assistant Collector therefore disallowed Modvat credit amounting to Rs. 51,308.14 was lying in balance as on 1-4-1993 ordering the same to be treated as lapsed. The Asstt. Collector also disallowed Modvat credit amounting to Rs. 22,187/-as wrongly availed during the period 1-4-1993 to 31-8-1993. The Assistant Collector therefore confirmed the demand of Rs. 51,308.14 and Rs. 22,187/- in respect of Modvat credit wrongly utilised. This demand be confirmed under Rule 57-I read with Section 11A of the Central Excises & Salt Act. On appeal the Collector (Appeals) rejected the appeal of the assessee.
3. Ms. Ginny Bedi, ld. Counsel appearing for the appellants submits that the Collector (Appeals) did not consider various pleas and submissions made before him. The ld. Counsel submits that option to avail the exemption to pay duty was that of the appellants. The appellants had chosen to pay duty on its final product therefore they could not be compelled to clear the goods at nil rate of duty; that the provisions under Rule 57-I will not apply in their case as there was no wrong or improper utilisation of credit taken. The ld. Counsel submits that the appellants, inputs and final products were specified goods under Rule 57A and therefore they were entitled to avail utilisation of Modvat credit of duty paid on inputs used in the manufacture of final products that there was no provision in Modvat scheme which authorises the balance lying in RG 23A Part II to lapse; that in case it is held that no duty was liable to be paid on the final product the appellant become automatically entitled to refund of duty paid on the final product. The ld. Counsel therefore prays that in view of the above submissions the appeal may be allowed.
4. Shri Ram Sharan, ld. JDR appearing for the respondent reiterated the findings of the lower authorities.
5. Heard the submissions of both sides. I find that the entire issue is based on presumption that since the appellants were entitled to exemption as small scale unit during the material period he could not clear the goods on payment of duty after availing Modvat credit on inputs. I find that this presumption of the appellants in this case is not based on well settled law. The law is that it is entirely the option of the assessee either to avail exemption or to pay duty at normal rate and avail Modvat credit if admissible. In the instant case the assessee opted to clear the goods on payment of duty on the normal rates and therefore there was nothing wrong in his opting for payment of duty on the final product and taking Modvat credit as it was admissible to him.
6. I also observe that both inputs as well as final product are specified goods under Rule 57A. Since both inputs and final product were specified goods therefore assessee in the instant case was eligible to avail Modvat credit on duty paid inputs. From the evidence on record I find that the appellants paid duty on the final product therefore there was nothing wrong in taking Modvat credit of duty paid on the inputs and utilisation of credit for payment of duty on the final product.
7. Further I find that there is no provision in the Rules of the Modvat scheme under which Modvat credit lying at any point of time lapses.
This credit can be utilised in terms of Rule 57F.8. Further some other submissions were also made by the appellants which are not relevant to the present case therefore are not gone into.
9. In view of the above discussions I set aside the impugned order and allow the appeal.