2003 (6) TMI 345 - AT - Central Excise

Issues Involved:
1. Admissibility of proforma credit under Rule 56A for inputs lying in stock as of 1-3-94.
2. Applicability of Notification No. 7/94 and its amendment by Notification No. 17/94.
3. Interpretation of Rule 56A and its sub-rules, particularly 56A(8).
4. Relevance of previous Tribunal decisions in similar cases.
5. Procedural aspects regarding the issuance and timing of show cause notices and corrigenda.

Issue-wise Detailed Analysis:

1. Admissibility of Proforma Credit for Inputs Lying in Stock as of 1-3-94:
The primary issue was whether proforma credit under Rule 56A of the Central Excise Rules, 1944, was admissible for raw materials/inputs lying in stock as of 1-3-94. The Commissioner (Appeals) had allowed the appeals of the assessee-respondents, holding that proforma credit was admissible for inputs lying in stock as of 1-3-94 and those received from 1-3-94 to 5-4-94. The Tribunal upheld this decision, noting that the notification's wording indicated that credit of duty paid on raw materials or component parts should be allowed, implying that goods lying in stock should also qualify for the benefit.

2. Applicability of Notification No. 7/94 and its Amendment by Notification No. 17/94:
Notification No. 7/94-C.E. (N.T.), dated 1-3-94, extended proforma credit to textile products, including cotton yarn, synthetic filament yarn, and yarn of synthetic staple fibers. This was further amended by Notification No. 17/94-C.E. (N.T.), dated 6-4-94, which clarified that yarn including sewing thread was covered as finished excisable goods. The Tribunal noted that the amendment was clarificatory and did not alter the eligibility for proforma credit for inputs lying in stock as of 1-3-94.

3. Interpretation of Rule 56A and its Sub-rules, Particularly 56A(8):
The Revenue argued that Rule 56A did not contain provisions similar to Rule 57H, which allows credit for inputs lying in stock. They contended that Rule 56A(8) restricted credit for materials not allowable before the commencement of CETA, 1985. The Tribunal found this reliance on Rule 56A(8) to be misconceived, as the rule and its proviso were irrelevant to the issue of proforma credit for inputs lying in stock. The Tribunal emphasized that the crucial factor was whether the goods had suffered duty, and if so, the benefit of proforma credit should be extended.

4. Relevance of Previous Tribunal Decisions in Similar Cases:
The Tribunal relied on its previous decisions, particularly in the cases of Ashok Leyland Ltd. and Vijayakumar Mills Ltd., which supported the view that proforma credit was admissible for inputs lying in stock. The decision in Ashok Leyland Ltd. held that set-off of duty on inputs lying in stock was available, and the Tribunal found this applicable to the present case. Similarly, in Vijayakumar Mills Ltd., it was held that sewing thread, being a variety of yarn, was covered by the relevant notification.

5. Procedural Aspects Regarding the Issuance and Timing of Show Cause Notices and Corrigenda:
The respondents-assessee argued that the corrigendum to the show cause notice was issued beyond the six-month limitation period, making the demand time-barred. The Tribunal noted that the original show cause notice was within the limitation period, and the corrigendum did not materially change the notice. However, the Tribunal found merit in the respondents' plea that no show cause notice was issued for disallowance of credit under Rule 56A(5), making the demand unsustainable. Nonetheless, since the Tribunal upheld the admissibility of proforma credit for inputs lying in stock, this procedural issue was rendered moot.

Conclusion:
The Tribunal upheld the orders of the Commissioner (Appeals), confirming that proforma credit under Rule 56A was admissible for inputs lying in stock as of 1-3-94. The appeals filed by the Revenue were dismissed, and the Tribunal emphasized that the key consideration was whether the goods had suffered duty, not the specific timing of their receipt or utilization.

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