ORDER
V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise (Appeals), Madras, dated 23-12-1991. Under the impugned order, the learned lower appellate authority had rejected the appellants plea for the benefit of MODVAT credit during the year 1989-90 based on a declaration which was filed on 26-3-1986 after which date the appellant started availing of the exemption and started functioning under the MODVAT Scheme after a lapae of over three years.
2. The learned Counsel briefly narrating the facts has pleaded that the appellants filed a declaration on 26-3-1986 for availing of the MODVAT credit as at the relevant time, taking into consideration the parameters of the exemption for small scale, the appellant was not eligible for the same. However, later on when the Government revised these parameters for the purpose of exemption to the small scale unit, the appellant unit qualified in terms of the notification for small scale industries for being considered as a small scale unit. He pleaded that even though this declaration for MODVAT which was filed on 26-3-1986 was still surviving, the appellant thereafter made an application for getting out of MODVAT and permission for the same was granted and the appellants started availing of the benefit of the exemption notification in respect of the clearances made. At that point, no doubt he pleaded the declaration for MODVAT filed became irrelevant. However, he pleaded that the learned lower authority had second thoughts and this permission given for getting out of MODVAT for availing of the exemption notification was sought to be withdrawn by the Asstt. Collector by issue of a show cause notice dated 10-12-1986. The matter since then had rested at that and no order in pursuance to this show cause notice has been passed. In the meantime, the appellant continued to avail of the benefit of exemption notification and only in October, 1989 when the appellants clearances exceeded the limit of Rs. 15 lakhs for the purpose of the benefit of exemption notification they became liable to pay the duty on the goods. At that time, the appellant did not file any further declaration for availing of the MODVAT credit, and continued to receive the inputs which were otherwise eligible for the benefit of MODVAT in respect of the finished goods which were also covered by the notification under Rule 57A. He pleaded the appellant is only a small scale manufacturer and did not understand the necessity of the requirement of law and this omission on his part in not filing the declaration may be condoned and the appellant my be given the benefit of MODVAT in respect of the goods which have been used for the manufacture of the goods. He pleaded that this declaration filed on 26-3-1986 should be taken to have subsisted for the purpose of availing of the MODVAT though claimed much later in 1989. In any case, there is no case for levy of any personal penalty as the appellant had acted based on his understanding of the law and he was prayed for setting aside the order of the learned lower authority or substantial reduction in the same.
3. Sh. Arulsamy, the learned DR, pleaded that the appellants earlier admittedly wanted to avail of the MODVAT facility and when he found that the facility under the exemption notification was. more beneficial to him, he himself opted out of it. Having done that he pleaded the appellant cannot simultaneously claim that all acts done or omitted for the purpose of MODVAT credit should be taken to be subsisting for all time. He has also pointed out that the appellants had been clearing the goods without informing the central excise officers, without following the statutory formalities and is liable to penalty.
4. I have considered the pleas made by both the sides. I observe that the appellants claim that the declaration filed on 26-3-1986 for MODVAT purposes should be taken to be subsisting even after they opted out of MODVAT when the appellant chose to clear the goods under exemption notification. It is observed that the assessee can choose the scheme under which he wants to operate and once he gets out of the ambit of a particular scheme, any declarations filed for the purpose of that scheme from which the appellant had opted out, ceases to have any legal force for the future the moment he gets out of the scheme. The purpose of declaration is to make the authorities aware of the fact that the appellant for the purpose of the scheme will be operating within the parameters relevant for that scheme and the authorities can verify the eligibility of the appellant with reference to the particulars furnished. Once the assessee opts out of the scheme and operates under a different regime and subsequently again opts for the earlier scheme, he has necessarily to file a fresh declaration as envisaged under that scheme to make the authorities aware of his operations under that scheme and also to enable the authorities to conduct check regarding his eligibility to the benefit of the scheme. In the present case, the appellant had first opted for the MODVAT scheme and thereafter he filed an application for getting out of the MODVAT for availing of the benefit of exemption notification. This permission was also granted by the Asstt. Collector. We would like to observe here that in law such a permission is not required. In any case, the fact remains that the appellant opted out of the MODVAT scheme and started availing of the benefit of exemption notification. The declaration therefore filed on 26-3-1986 will cease to have any legal force, thereafter, the moment the appellant started clearing the goods under an exemption notification. The appellant therefore on the volition chosen to give up his right under the MODVAT scheme. As and when therefore the appellant oped for the MODVAT scheme again when his goods become liable to duty in terms of exemption notification, he was required to file a fresh declaration under Rule 57G. I observe that Rule 57G enjoins upon the assessee to file a declaration before availing of any MODVAT credit in respect of the individual inputs which are used in or in relation to the manufacture of the notified finished product. This declaration enables the authorities to know as to what are the inputs which are used by the appellant and how the same are being used for the purpose of exercising the control in regard to the compliance with the reqirements of the MODVAT scheme as set out in the Central Excise Rules. The eligibility of the appellant to MODVAT credit would commence only from the date when the declaration is filed and acknowledged. Not having done that, the appellant cannot be said to have become eligible to the MODVAT credit. In sum, I observe that the learned lower authority is right in denying the appellants the benefit of MODVAT credit. While it is not contested that the appellants had not been complying with the requirements of the central excise law in regard to filing of the returns, maintaining of the records in respect of the goods manufactured by them and cleared under the benefit of exemption notification, his prayer for leniency has to be considered in the light of the pleas advanced in this regard. I find that the appellant is a small scale manufacturer and it is possible that he was not fully aware of all the legal requirements. It is enjoined upon an assessee to seek a clarification in case the appellant is not fully informed about the requirements under the Rules for the purpose of manufacture and clearance of the excisable goods. The appellant having failed to do so is certainly liable to penalty. However, taking into consideration the pleas urged and in the facts and circumstances, ends of justice would be served if the penalty is reduced to Rs. 500/- (Rupees five hundred). I order accordingly. But for the above modifications, the appeal is otherwise dismissed.