2011 (4) TMI 638 - AT - Central Excise

Deemed credit - Demand - Notification No. 6/2002-CE(NT) dated 01.03.2002 allows the assessee to take deemed credit at the rate of 33 1/3 per cent of the credit of the duty of excise leviable under Central Excise Act, 1944 and the Additional Duty of Excise leviable under Additional Duties of Excise (Goods of special Importance) Act, 1957 in respect of Cotton fabrics. Similarly, deemed modvat credit at the rate of 66 2/3 per cent in respect of Man Made fabrics is available in terms of the said Notification - Held that having availed the credit under the head Basic Excise duty and having used the entire credit for payment of basic excise duty, the appellant have paid the additional excise duty from PLA. If the Revenue s contention is that a part of the basic excise duty credit should have been availed under the head additional excise duty, the appellant was entitled to use the same very credit for payment of additional excise duty, instead of paying the additional excise duty from PLA - Appeal is allowed

Issues:
1. Availment of deemed credit facility on duty payable on final product under specific notifications.
2. Bifurcation of deemed credit applicable to Basic Excise Duty (BED) and Additional Excise Duty (AED).
3. Admissibility of deemed credit at different rates for Cotton fabrics and Man Made Fabrics.
4. Interpretation of Notification No. 6/2002-CE(NT) dated 01.03.2002 regarding deemed credit facility.
5. Utilization of deemed credit towards payment of excise duty.

Analysis:
1. The case involved the appellants engaged in processing textile fabrics under specific chapters of the Central Excise Tariff Act, 1985, availing deemed credit facility on duty payable on final products under relevant notifications. The issue arose when the appellants did not bifurcate the deemed credit applicable to BED and AED as per the prescribed ratio, resulting in excess deemed credit availed on BED and non-availment on AED during a specific period. Consequently, a show cause notice was issued for recovery of excess deemed credit, short payment of duty, interest, and imposition of a penalty.

2. The Commissioner (Appeal) upheld the demand, emphasizing that the appellants were required to pay duty at specific rates on final products and avail deemed credit accordingly. It was observed that the appellants had availed excess deemed credit on BED and not on AED as required, leading to short payment of duty. The failure to adhere to the prescribed rates for deemed credit led to the imposition of recovery demands and penalties.

3. The Tribunal analyzed Notification No. 6/2002-CE(NT) dated 01.03.2002, which allowed deemed credit at different rates for Cotton fabrics and Man Made Fabrics. The Tribunal clarified that the facility was available based on the aggregate duty of excise leviable under the Central Excise Act and Additional Duties of Excise Act, without a requirement to segregate BED and AED. The Tribunal emphasized that the revenue's insistence on separate availing of credits for both duties was not supported by the notification's language, leading to a conclusion in favor of the appellants.

4. Further, the Tribunal highlighted that the notification did not mandate splitting the deemed credit into basic and additional excise duties. The provisions allowed utilizing the credit towards payment of either duty without differentiation. Therefore, the Tribunal concluded that the appellants' utilization of the entire credit under BED and payment of AED from PLA did not warrant denial of benefits, as long as the total credit availed complied with the notification's requirements.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellants. The decision was based on the interpretation of the notification, emphasizing the availability of deemed credit based on the aggregate duty without the need for separate utilization for basic and additional excise duties, ensuring revenue neutrality in the appellants' transactions.

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