Paragon Cable Corpn. and anr. Vs. Cce - Court Judgment

Excerpt:
1. these are two appeals involving a common issue for determination and as such these are clubbed together in this common order.2. the facts, in brief, are that the appellants are engaged in the manufacture of wires and cables. they are neither registered as ssi unit with the director of industries/development commissioner nor with the dgtd. the appellants were eligible for the benefit of clause 2 of notification no. 1/93 dt. 28.2.1993, wherein an assessee is entitled to duty-free clearance upto rs. 30.00 lakh. the department alleged that since the appellants were entitled to duty-free clearance upto rs. 30.00 lakh, they were not entitled to the benefit of credit of duty on inputs under the modvat scheme as they fall within the purview of rule 57c which inter alia stipulates that if the final product is exempt, credit of duty paid on input under the modvat scheme cannot be taken.the department issued a show cause notice asking the appellants to explain as to why the modvat credit should not be denied to them and why the sum already availed should not be recovered from them. the appellants submitted that they had the option to either avail the exemption under notification no. 1/93 or to clear the goods on payment of duties and avail the credit of duty paid on inputs under the modvat scheme. the adjudicating authorities after hearing both the sides and relying on the judgment of the honourable andhra pradesh high court wherein it was held that the appellants have illegally taken modvat credit and the appellants were directed to pay the amount already utilized, decided the issue.2. shri r. pal singh, id. consultant appearing for the appellants, submits that the very same issue has been decided by the tribunal in favour of the assessee in a number of cases. he submits that the tribunal in the case of mechciv engineers reported in 1997 (20) rlt 200 held that "credit not deniable as option to avail of full exemption upto rs. 30.00 lakh or work under modvat scheme is with assessee". the id. counsel also referred to the decision of the tribunal in the case of prominent plastic industries reported in 1997 (20) rlt 312 in which the tribunal held that "the assessee has option to pay duty under notification no. 14/92-ce and claim modvat credit of duty paid on inputs" and that the "department cannot force assessee to claim full exemption under notification no. 1/93-ce". the id. counsel also referred to the decision of this tribunal in the case of j.v.industries reported in 1997 (19) rlt 881. in this case the tribunal held that the assessee has option either to claim full exemption under notification no. 1/93-ce dt. 28.2.1993 or avail of modvat credit benefits. the id. counsel submitted that the tribunal in the case of everest converters ltd. held that "once we hold that availment of the exemption notification is an option with the assessee, the expression in rule 57c 'final product is exempt from whole of duty of excise' has to be read as 'final product avails of exemption from whole of duty of excise leviable thereon, otherwise this will frustrate the basic purpose of the scheme of modvat credit i.e. to avoid cascading effect of duty upon duty." the id. counsel sumits that in view of the consistent view followed by the tribunal on this question, the appeal may be allowed as their case was fully covered by the ratio of decisions cited and relied upon by them.3. shri satnam singh, id. sdr appearing for the respondent-commissioner submits that the units are not ssi units and hence reiterates the findings of the id. adjudicating authority.4. heard submissions of both sides. we find that the short point agitated before us is whether there is an option available to an assessee either to opt for modvat scheme or take clearance in terms of the exemption notification applicable to him. in the instant two cases, the appellants are not ssi units, but were covered by clause 2 of notification no. 1/93 in as much as they were not registered units with the dgtd. therefore, in terms of clause 2 of the notification no. 1/93, the appellants are entitled to the benefit of exemption. however, the appellants instead of claiming the benefit of exemption, started paying duty on final product and claiming credit of duty paid on inputs under the modvat scheme. we note that a similar issue arose in a number of cases. some of the cases have been cited above. in all these cases, the assessee was entitled either to avail of the exemption under the notification or take modvat credit of duty paid on inputs. the short point that the adjudicating authority has dealt with is that rule 57c of central excise rules, 1944 places a restriction on taking credit if final product is exempt. in the instant case, the final product manufactured by the appellants is wires and cables. wires and cables are not exempt as such, and, therefore, they will not come under the purview of rule 57c of the central excise rules. this particular aspect was examined by the tribunal in detail in the case of everest convertors cited supra. following the ratio of decisions in the cases cited and relied upon by the appellants and distinguishing the case decided by the honourable andhra pradesh high court in the case of ganesh metal processing. this decision of the honourable andhra pradesh high court has already been distinguished in one of the decisions of the tribunal (mechciv engineers v. cce, new delhi). following the ratio of this decision, we hold that the option either to avail the exemption under a particular notification or to pay duty on the final product and take credit of duty on inputs under the modvat scheme lies with the assessee. in the circumstances, we allow the appeals. consequential relief, if any, shall be admissible to the appellants in accordance with law.

Judgment:
1. These are two appeals involving a common issue for determination and as such these are clubbed together in this common order.

2. The facts, in brief, are that the appellants are engaged in the manufacture of wires and cables. They are neither registered as SSI unit with the Director of Industries/Development Commissioner nor with the DGTD. The appellants were eligible for the benefit of Clause 2 of Notification No. 1/93 dt. 28.2.1993, wherein an assessee is entitled to duty-free clearance upto Rs. 30.00 lakh. The department alleged that since the appellants were entitled to duty-free clearance upto Rs. 30.00 lakh, they were not entitled to the benefit of credit of duty on inputs under the modvat scheme as they fall within the purview of Rule 57C which inter alia stipulates that if the final product is exempt, credit of duty paid on input under the modvat scheme cannot be taken.

The Department issued a show cause notice asking the appellants to explain as to why the modvat credit should not be denied to them and why the sum already availed should not be recovered from them. The appellants submitted that they had the option to either avail the exemption under Notification No. 1/93 or to clear the goods on payment of duties and avail the credit of duty paid on inputs under the modvat scheme. The adjudicating authorities after hearing both the sides and relying on the judgment of the Honourable Andhra Pradesh High Court wherein it was held that the appellants have illegally taken modvat credit and the Appellants were directed to pay the amount already utilized, decided the issue.

2. Shri R. Pal Singh, Id. Consultant appearing for the appellants, submits that the very same issue has been decided by the Tribunal in favour of the Assessee in a number of cases. He submits that the Tribunal in the case of Mechciv Engineers reported in 1997 (20) RLT 200 held that "credit not deniable as option to avail of full exemption upto Rs. 30.00 lakh or work under modvat scheme is with assessee". The Id. Counsel also referred to the decision of the Tribunal in the case of Prominent Plastic Industries reported in 1997 (20) RLT 312 in which the Tribunal held that "the assessee has option to pay duty under Notification No. 14/92-CE and claim modvat credit of duty paid on inputs" and that the "Department cannot force assessee to claim full exemption under Notification No. 1/93-CE". The Id. Counsel also referred to the decision of this Tribunal in the case of J.V.Industries reported in 1997 (19) RLT 881. In this case the Tribunal held that the assessee has option either to claim full exemption under Notification No. 1/93-CE dt. 28.2.1993 or avail of modvat credit benefits. The Id. Counsel submitted that the Tribunal in the case of Everest Converters Ltd. held that "Once we hold that availment of the exemption notification is an option with the assessee, the expression in Rule 57C 'final product is exempt from whole of duty of excise' has to be read as 'final product avails of exemption from whole of duty of excise leviable thereon, otherwise this will frustrate the basic purpose of the scheme of modvat credit i.e. to avoid cascading effect of duty upon duty." The Id. Counsel sumits that in view of the consistent view followed by the Tribunal on this question, the appeal may be allowed as their case was fully covered by the ratio of decisions cited and relied upon by them.

3. Shri Satnam Singh, Id. SDR appearing for the respondent-Commissioner submits that the units are not SSI units and hence reiterates the findings of the Id. Adjudicating Authority.

4. Heard submissions of both sides. We find that the short point agitated before us is whether there is an option available to an assessee either to opt for modvat scheme or take clearance in terms of the exemption notification applicable to him. In the instant two cases, the appellants are not SSI units, but were covered by Clause 2 of Notification No. 1/93 in as much as they were not registered units with the DGTD. Therefore, in terms of Clause 2 of the Notification No. 1/93, the appellants are entitled to the benefit of exemption. However, the appellants instead of claiming the benefit of exemption, started paying duty on final product and claiming credit of duty paid on inputs under the modvat scheme. We note that a similar issue arose in a number of cases. Some of the cases have been cited above. In all these cases, the assessee was entitled either to avail of the exemption under the notification or take modvat credit of duty paid on inputs. The short point that the adjudicating authority has dealt with is that Rule 57C of Central Excise Rules, 1944 places a restriction on taking credit if final product is exempt. In the instant case, the final product manufactured by the appellants is wires and cables. Wires and cables are not exempt as such, and, therefore, they will not come under the purview of Rule 57C of the Central Excise Rules. This particular aspect was examined by the Tribunal in detail in the case of Everest Convertors cited supra. Following the ratio of decisions in the cases cited and relied upon by the Appellants and distinguishing the case decided by the Honourable Andhra Pradesh High Court in the case of Ganesh Metal Processing. This decision of the Honourable Andhra Pradesh High Court has already been distinguished in one of the decisions of the Tribunal (Mechciv Engineers v. CCE, New Delhi). Following the ratio of this decision, we hold that the option either to avail the exemption under a particular notification or to pay duty on the final product and take credit of duty on inputs under the modvat scheme lies with the Assessee. In the circumstances, we allow the Appeals. Consequential relief, if any, shall be admissible to the Appellants in accordance with law.