SIDHMUKH FLEXIBLE PACKAGING (P) LTD. Vs. CCE

JUDGEMENT

(1.) THE issue involved in this appeal, filed by M/s. Sidhmukh Flexible Packaging Pvt Ltd is whether it is open to them to pay excise duty even if the excisable goods manufactured by them are exempted from payment of whole of duty under a Notification.

(2.) 1 The Appellants, in their letter dated 24.12.2004, has requested to decide the appeal on merit. We, therefore, heard Shri O.P. Arora, learned SDR, and perused the records. The Appellants, a SSI Unit, manufacture lay flat tubing, polymer bags and polythene sheets falling under Chapter 39 of the Schedule to the Central Excise Tariff Act. Notification No. -CE, dated 2.6.98 (Srl. No.71) exempts lay flat tubing from payment of whole of the excise duty unconditionally. The Appellants, instead of availing the benefit of the exemption Notification, paid duty at the tariff rate in respect of lay flat tubing and availed of MODVAT Credit of the duty paid on inputs used in or in relation to the manufacture of lay flat tubing. The Deputy Commissioner, under Order -in -Original dated 20.1.2000, disallowed the Modvat Credit amounting to Rs.5,41,849/ - and imposed a penalty of Rs.25,000/ - holding that 'in terms of Rule 57C of the Central Excise Rules, 1944, no Credit of the duty is available if the inputs are used in the manufacture of final products which are exempt from the whole of the duty of excise or are chargeable to nil rate of duty. The Commissioner (Appeals) also under the impugned Order has rejected their appeal.

(3.) ON the other hand Shri O.P Arora, learned SDR, submitted that the lay flat tubings manufactured by the Appellants are exempted from whole of the duty unconditionally under .5/98 -CE, dated 2.6.98 (Srl. No.71); that Rule 57C of the Central Excise Rules, 1944 clearly mentions that no credit of the duty shall be allowed on such quantity of inputs as is used in the manufacture of final products which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty." He thus contended that provisions of Modvat Rules clearly bars the availment of Modvat Credit when the final product is exempted from payment of duty; that Rule 57C refers to a product which is exempt from payment of duty and does not mention of an option to the manufacturer to ignore the exemption from payment of duty provided by the Notification. He, further, submitted that duty of excise is levied and collected in such manner as may be prescribed as per Section 3 of the Central Excise Act, on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act; that Section 5A empowers Central Government to exempt excisable goods from the whole or any part of the duty of excise; that as per Section 38 of the Central Excise Act, every Notification issued under Section 5A shall be laid before each House of parliament which has powers either to make amendments or annul it or leave it as it is; that thus exemption Notification has the approval of the Parliament and as such has to be followed as such. He relied upon the judgment of the Supreme Court in the case of CCE v. Parle Exports (P) ltd., : 1988 (38) ELT 741 (SC) wherein the Apex Court has held that the Notification issued under Central Excise Rules should be read along with the Act and when a Notification is issued in accordance with the powers conferred by the Statute, it has statutory force and validity and therefore, the exemption under Notification is as if it were contained in the Act itself. Reliance has also been placed on the decision in the case of Orient Weaving Mills (P) Ltd. v. U.O.I., 1978 ELT J 31 (SC) and Orient Paper Mills Ltd. v. Deputy Director of Inspection, Customs & Central Excise, 1982 ELT 247 (Del.).