1985 (1) TMI 326 - AT - Central Excise

Issues Involved:
1. Interpretation of Notification No. 201/79-CE.
2. Jurisdiction of the Tribunal.
3. Disallowance of proforma credit of duty on inputs used in the manufacture of exempted goods.
4. Requirement for furnishing details of inputs used in the manufacture of each variety of tyres.
5. Utilization of proforma credit for payment of duty on dutiable goods.

Detailed Analysis:

1. Interpretation of Notification No. 201/79-CE:
The primary issue in these appeals was the interpretation of Notification No. 201/79-CE, dated 4-6-79, which exempts excisable goods from so much of the duty of excise as is equivalent to the duty paid on the inputs. The notification's substantive part and its Appendix were scrutinized to understand the conditions under which proforma credit could be availed and utilized.

The Tribunal noted that the operative clause of Notification No. 201/79-CE is identical to its predecessor, Notification No. 178/77, and thus required allocation and correlation of inputs to each of the output goods. The second proviso to the notification clearly stated that it does not apply to goods exempted from the whole of the duty or chargeable to a nil rate of duty. This proviso implies that inputs used in the manufacture of exempted goods should not be considered for granting the exemption.

2. Jurisdiction of the Tribunal:
The Tribunal addressed the jurisdictional question, noting that the South Regional Bench had initially transferred the appeals to a Special Bench, considering them as involving a question related to the rate of duty. The Tribunal agreed with this view and held that the appeals fell within its jurisdiction.

3. Disallowance of Proforma Credit of Duty on Inputs Used in the Manufacture of Exempted Goods:
The Assistant Collector had disallowed the entire proforma credit of duty taken by the appellants on duty-paid raw materials used in manufacturing tyres, some of which were cleared on payment of duty and others free of duty. The Tribunal found that the appellants were not entitled to proforma credit for inputs used in the manufacture of exempted goods. However, it was not justified to disallow the entire proforma credit. Instead, the credit should be disallowed only to the extent of inputs used in the manufacture of exempted goods.

4. Requirement for Furnishing Details of Inputs Used in the Manufacture of Each Variety of Tyres:
The Assistant Collector required the appellants to furnish full details of the inputs used in the manufacture of each variety of tyres. The Tribunal upheld this requirement, noting that the manufacturer must provide a declaration indicating the full description of the inputs intended to be used in the manufacture of each of the said goods, as per Para 1 of the Appendix to the notification.

5. Utilization of Proforma Credit for Payment of Duty on Dutiable Goods:
The Tribunal examined whether the proforma credit of duty on inputs used in the manufacture of exempted goods could be utilized for payment of duty on dutiable goods. It concluded that the proforma credit could not be utilized for this purpose. The substantive part of the notification and the second proviso made it clear that the benefit of proforma credit could not be extended to inputs used in the manufacture of exempted goods.

Conclusion:
The Tribunal modified the orders of the lower authorities to the extent that the proforma credit shall be disallowed only to the extent of the inputs used in the manufacture of exempted goods. The appellants were permitted to furnish the necessary allocation of raw materials and duty thereon within two months. The proper officer would then determine the quantum of credit to be disallowed and allow the balance of the proforma credit allocable to dutiable goods. The orders of the Collector (Appeals) were confirmed with this modification.

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