1987 (4) TMI 81 - HC - Central Excise

Summary

Issues Involved:
1. Applicability of Proforma Credit Procedure under Rule 56A of the Central Excise Rules, 1944.
2. Interpretation of the proviso to Rule 56A(2) regarding the same Tariff Item requirement for raw materials and finished goods.

Detailed Analysis:

1. Applicability of Proforma Credit Procedure under Rule 56A of the Central Excise Rules, 1944:

The assessee, M/s. Hyderabad Asbestos Cement Products Limited, sought a writ of Certiorari to quash the order dated 30-9-1983 by the Assistant Collector, Central Excise, Hyderabad IV Division. The order denied the assessee the benefit of Proforma Credit Procedure under Rule 56A for the excise duty/countervailing duty paid on cement and asbestos fibre used in the manufacture of asbestos cement products. The principal raw materials, cement and asbestos fibre, are subject to excise duty under different Tariff Items (22F for asbestos fibre and 23 for cement), while the finished products fall under Tariff Item 23C. The Assistant Collector's rejection was based on the interpretation that Rule 56A(2) requires the duty on raw materials and finished goods to be paid under the same Tariff Item to avail of the Proforma Credit Procedure.

2. Interpretation of the proviso to Rule 56A(2) regarding the same Tariff Item requirement:

The legislative history of Rule 56A was traced, indicating its introduction on 8-12-1962 and subsequent amendments. The rule allows credit for duty paid on raw materials or component parts used in the manufacture of specified excisable goods, subject to conditions. The proviso added on 8-1-1963 and amended on 26-10-1963 stipulates that no credit shall be allowed unless the duty is paid under the same Tariff Item for both raw materials and finished goods or if remission or adjustment of duty is sanctioned by the Central Government.

The core issue was whether the proviso to Rule 56A(2) carves out an exception to the main provisions of sub-rules (1) and (2). The authorities argued that unless the conditions in the proviso are met, credit of duty cannot be allowed even if the main conditions of Rule 56A(1) and (2) are satisfied. Specifically, the duty must be payable under the same Tariff Item for both raw materials and finished goods. The assessee's counsel contended that this interpretation is untenable and that the Central Government's notifications specifying various finished goods for proforma credit under Rule 56A(1) would be rendered superfluous if the proviso's conditions were strictly applied.

The court considered the arguments and concluded that the proviso to Rule 56A(2) indeed imposes conditions that must be satisfied for credit of duty to be allowed. The language of the proviso is clear and categorical, denying credit unless the conditions specified are met. The court also referred to the proviso to clause (ii) of the proviso to Rule 56A(2), which allows credit if the Central Government specifically sanctions remission or adjustment of duty.

The court found support in the Gujarat High Court's decision in Digvijay Cement Company Limited v. Union of India, which held that the proforma credit procedure under Rule 56A(1) does not apply unless the excise duty on both raw materials and finished goods is paid under the same Tariff Item.

Judgment:

The writ petition was dismissed, upholding the Assistant Collector's order and confirming that the benefit of the Proforma Credit Procedure under Rule 56A is not available unless the duty is paid under the same Tariff Item for both raw materials and finished goods or if remission or adjustment of duty is sanctioned by the Central Government. The court dismissed the petition without costs.