V.P. Gulati, Member (T)

1. In these two appeals the issue involved is a common one and therefore they are taken up together for disposal today.

2. The short point that calls for our consideration is whether the appellants herein who are availing of the benefit of Notification No. 175/86 in respect of certain specified commodities can avail of the benefit of Modvat credit in respect of some other commodity. The learned Adjudicating Authority and also the learned Lower Appellate Authority have followed the ratio of the instructions issued by the Ministry and have held that inasmuch as the appellants were availing of the benefit of Notification No. 175/86 notwithstanding the commodities for which they are availing of the credits are different from those in respect of which the Modvat credit is claimed, the appellants are not eligible for the benefit of the Modvat credit as claimed. The Ld. Advocate for the appellants referred to a decision of this Bench in the case of Swaraj Paint Industries v. Collector of Central Excise, Cochin, reported in MANU/CC/0032/1990 : 1991 (52) ELT 594 (Tri.). This Bench in the said case after taking into account the Scheme of the Modvat and also the parameters of the Notification No. 175/86 have held as under :

"There is no dispute that the appellants as a manufacturer are covered by the said Notification 175/86. The dispute is in regard to the applicability of the provisions contained in sub-clause (a)(i) as set out above. A reading of the said sub-clause (a)(i) would show that where a manufacturer avails of the credit of duty paid on inputs used in the manufacture of specified goods he will not be entitled to full exemption. The point to be considered is whether in case a particular manufacturer avails of the MODVAT credit in respect of a particular category of specified goods his eligibility for total exemption in respect of other specified goods in respect of which no MODVAT credit is availed would be affected and all other specified goods also will come within the purview of sub-clause (a)(i) of the Notification. In our view, taking into consideration the provisions of the Modvat scheme and Notification 175/86, there is no doubt that the concessions envisaged under these are in respect of finished goods cleared from a factory and which are chargeable to duty and the purpose of both these is to reduce the total impact of duty in respect of finished goods. Under the Modvat scheme in case a finished goods paid duty the duty to the extent paid on inputs and used for those finished goods is given as credit for being utilised for payment of duty. Under Notification 175/86 the benefit is available to individual specified goods as set out in the Notification and what is envisaged in sub-clause (a)(i) is that the benefit available under this Notification is sought to be restricted to the lesser level where a manufacturer avails of MODVAT Scheme, for the reason that he is already benefiting by way of the credit he has taken on the inputs which have been utilised in the specified goods. He however, cannot be placed at a disadvantage in respect of those goods where the input relief by way of MODVAT credit is not taken and it would in fact be placing an invidious burden on a manufacturer in case he takes the benefit of MODVAT credit under Rule 57A for one item and he is called upon to pay the price for that by way of payment of higher rate of duty in terms of Notification 175/86 on goods in respect of which he is not claiming any MODVAT credit. Sub-clause (a)(i), therefore, has to be read only in the context of the goods for which MODVAT credit is availed of and not for other goods. In view of this we hold that since the appellant had not availed of the benefit of MODVAT credit in respect of the inputs used in the goods other than those falling under Tariff Heading 3208, they should be given the full benefit of the exemption as would be available otherwise as if the MODVAT credit is not being availed of....