2013 (11) TMI 848 - AT - Central Excise

Cenvat / Modvat credit Cenvat Credit on Inputs lying in stock after availing SSI exemption - Interpretation of the Deemed Credit Order issued by Excise Ministry dated 1.3.94 vis-a-vis., Notification No.1/93-C.E. - Effect of the trade note No.81/94 issued by the Chandigarh Central Excise Collectorate Held that - following M/s. Sood Steel Industrial (P) Ltd. Versus Commissioners of Central Excise & Anr. 2009 (4) TMI 62 - HIMACHAL PRADESH HIGH COURT - The benefits under this notification were limited to clearances of Rs. 75 lacs but this does not mean that manufacturers whose clearances exceeded Rs. 75 lacs were not availing the exemption under the notification the trade note No.81/94 limiting this benefit to those manufacturers whose clearances do not exceed Rs. 75 lacs is totally illegal and against the deemed credit order issued by the Ministry - though the department may be bound by its trade note, the industry is not bound by the same Assessee was entitled to avail benefit of the deemed credit order since he was availing benefit of the notification dated 28.2.1993. The Tribunal mis-interpreted the deemed credit order dated 1-3-1994 and the assesse was entitled to avail benefit of the deemed credit order since he was availing benefit of the notification dated 28-2-1993 - the trade note No. 81/94 dated 25-7-1994 cannot override the deemed credit order and the said trade note is illegal Decided in favour of Assessee.

Issues Involved:
1. Eligibility for deemed credit under Government of India's order No. TS/36/94-TRU dated 01.03.94.
2. Interpretation of Rule 57G of the Central Excise Rules, 1944.
3. Impact of the omission of Chapter headings 72.30 and 73.27 from the CETA, 1985.
4. Applicability of the SSI exemption under Notification No. 1/93-CE.
5. Validity of trade notes issued by the Central Excise Collectorate.

Detailed Analysis:

1. Eligibility for Deemed Credit:
The appellants were engaged in the manufacture of rolled products of iron and steel and were availing deemed credit at Rs. 920/- per MT on ingots and re-rollable materials. The deemed credit was based on Government of India's order No. TS/36/94-TRU dated 01.03.94 issued under Rule 57G of the erstwhile Central Excise Rules, 1944. The show cause notices questioned the eligibility for this deemed credit, citing the omission of relevant chapter headings from CETA, 1985, and the lack of documents evidencing payment of duty.

2. Interpretation of Rule 57G:
The show cause notices argued that the proviso 2 to Rule 57G did not relax the requirement of the existence of documents evidencing payment of duty. The adjudicating authority relied on previous Tribunal decisions to disallow the deemed modvat credit, asserting that the appellants' clearance value exceeded Rs. 75 lakhs during the year 1994-95, thus disqualifying them from deemed credit benefits.

3. Impact of Omission of Chapter Headings:
The omission of Chapter headings 72.30 and 73.27 from CETA, 1985, was a key point in the show cause notices. It was argued that due to this omission, the inputs received by the appellants did not fall under the purview of Notification No. 5/94-CE (NT) dated 01.03.94, thus disqualifying them from deemed credit.

4. Applicability of SSI Exemption:
The appellants were availing the benefit of SSI exemption under Notification No. 1/93-CE. The adjudicating authority and the first appellate authority upheld that the appellants could not avail the benefit of deemed credit after their clearances exceeded Rs. 75 lakhs. However, the appellants contested this, citing decisions from higher judicial forums that allowed the benefit of deemed credit despite exceeding the Rs. 75 lakhs threshold.

5. Validity of Trade Notes:
The Chandigarh Collectorate issued a trade note on 25-7-1994, stating that the benefit of deemed credit was not admissible to re-rolling units whose value of clearances exceeded Rs. 75 lakhs. This trade note was challenged, with the appellants arguing that it could not override the deemed credit order issued by the Ministry.

Judgment Analysis:
The Tribunal considered the submissions and reviewed the case record. The undisputed facts were that the appellants purchased ingots and re-rollable materials from outside and were eligible for SSI exemption during the relevant period. The revenue authorities sought to reverse the deemed credit benefit based on the appellants' turnover exceeding Rs. 75 lakhs.

The Tribunal referred to the judgment of the Hon'ble High Court of Himachal Pradesh in the case of Sood Steel Industries (P) Ltd. vs. Commissioner of Central Excise. The High Court had held that manufacturers availing the benefit of Notification No. 1/93-CE were entitled to deemed credit, regardless of exceeding the Rs. 75 lakhs clearance limit. The Tribunal found this judgment applicable and binding, thus setting aside the impugned orders and allowing the appeals with consequential relief.

Conclusion:
The Tribunal concluded that the appellants were entitled to the benefit of deemed credit under the Government of India's order No. TS/36/94-TRU dated 01.03.94, despite their clearances exceeding Rs. 75 lakhs. The trade note issued by the Chandigarh Collectorate was deemed illegal and not binding on the industry. The appeals were allowed, and the impugned orders were set aside.

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