ORDER
P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 30-9-1987 passed by the Collector of Central Excise, Chandigarh. Briefly stated the facts of the case are that the appellants who are engaged in the manufacture of Synthetic Rubber Nylon Sandwich Belting and various other rubber products filed Classification List No. 46/KPT/86 claiming therein (i) complete exemption from levy of duty upto the limit of Rs. 15/30 lakhs in terms of Notification No. 175/86, dated 1-3-1986 in respect of Leather Nylon Sandwich Belting, Leather Nylon Condensor Tape and Woven Fabric Beltings and (ii) benefit of Modvat scheme in respect of Synthetic Rubber Nylon Sandwich Belting, Autoleveller belts and wastes thereof. Thereafter on 23-6-1986 they filed Classification List No. 59/KPT/86 effective from 2-4-1986 seeking withdrawal from Modvat Scheme and claiming total exemption from levy of duty upto the limit of Rs. 15/30 lakhs in terms of Notification No. 175/86, dated 1-3-1986 in respect of Nylon Sandwich Belting Autoleveller belts and wastes thereof. By his order dated 22-10-1986 the Assistant Collector approved the Classification List No 46/KPT/86. Thereafter the appellants filed a claim for refund of duty amounting to Rs. 1,74,460.87 paid during the period 1-4-1986 to 20-6-1986 on the grounds that they were eligible for exemption upto the prescribed limits in terms of Notification No 175/86 since they had opted out of the Modvat Scheme and credit of Rs. 462/- utilised by them had also been reversed by making the payment of an equivalent amount on 25-8-1986 through debit in their PLA. However, by his order dated 2-3-1987, the Assistant Collector rejected the appellants’ claim on the grounds that in terms of the Ministry of Finance letter No. 22/27/86 (TRU), dated 20-6-1986 the appellants were not entitled to opt out of the Modvat Scheme before the end of the relevant financial year, since the scheme for exemption under Notification No. 175/86 provides for an integrated method of computation of value of clearances made during a financial year. Being aggrieved by the order passed by the Assistant Collector, the appellants preferred an appeal before the Collector (Appeals) who by the impugned order confirmed the findings of the Assistant Collector.
2. On behalf of the appellants, Shri V.K. Agarwal, Learned Advocate appeared before us. He stated that the appellants had opted out of the Modvat Scheme by filing Classification List No. 59/KPT /86, dated 23-6-1986 before the Assistant Collector had accorded the approval to Classification List No. 46/KPT/86 and they had also reversed the credit of Rs. 462/- availed by them by making the payment of an equivalent amount through their FLA. He submitted that under these circumstances it could not be said that Modvat credit was availed of by the appellants. He contended that the impugned order was illegal since the appellants not having availed the Modvat concession were eligible for the exemption under Notification No. 175/86. In support 6f this contention he cited the following case law :
(i) R.S. Joshi v. Ajit Mills Ltd. – 1977 (40) STC 497
(ii) Raman Boards Ltd. v. Collector of Central Excise -1988 (36) E.L.T. 615.
3. On behalf of the respondents, Shri Sharad Bhansali, SDR stated that notwithstanding the reversal of the credit by the appellants, they will be deemed to have availed the credit. He argued that under these circumstances it would not be permissible for them to exercise the option of out of the Modvat Scheme with retrospective effect. He contended that the appellants were not entitled to claim any refund of duty in respect of the goods cleared prior to the date on which they opted out of the Modvat Scheme.
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the only question that arises for consideration in this case is whether after having once opted for the Modvat Scheme, it was permisible for the appellants to opt out of the scheme at any time during the same financial year by reversing the credit availed of.
5. It is seen that in the case of Brooks Industries v. Collector of Central Excise reported in 1989 (41) E.L.T. 183 in which duty was demanded and penalty imposed on the appellants who had chosen to opt out of the Modvat Scheme to work under Notification No 175/86, the Tribunal held that there is nothing in the relevant Rules to prevent a manufacturer who has exercised his option to operate under Modvat Scheme from opting out of the Scheme for the purposes of availing the exemption under Notification No. 175/86, dated 1-3-1986 as long as the value of clearances under the Modvat are also included for determining the value of clearances under Notification No 175/86. Para 6 of the said order being relevant is reproduced below :
“6. The question whether a manufacturer having once exercised his option to operate under the MODVAT Scheme would be legally in a position to opt out of it before the end of the financial year was considered and settled by this Bench of the Tribunal in the order relied upon by the learned Counsel. The Tribunal had found that MODVAT Scheme is covered by Rules 57A to 57] of the Central Excise Rules, 1944 and that a perusal of these rules showed that there is nothing in these rules to indicate 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 clearance under MODVAT 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 ”
6. From the order of the Tribunal extracted above, it follows that there is nothing in the Rules to prevent a manufacturer from opting out of the MODVAT Scheme at any time of the financial year for the purpose of availing the full exemption upto the prescribed limits in terms of Notification No, 175/86 as long as the clearances under the MODVAT are also included for determining the aggregate value of clearances under the said notification. We therefore hold that on opting out of the MODVAT Scheme, the appellants were eligible for the full exemption in respect of their clearances including the clearances under the MODVAT upto the prescribed limits in terms of Notification No 175/86.
7. In view of the foregoing, we allow the appeal. The appellants shall be entitled to consequential relief in terms of our findings above.