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1999 (12) TMI 63 - SC - Central ExciseWhether the benefit of proforma credit procedure specified in Rule 56A(1) is available to the appellants though the raw materials consumed by the appellants in their manufacture of the final products are excisable under tariff items different from the one under which their final products are excisable? Held that - We are in no doubt that to avail the benefit of proforma credit under Rule 56A the inputs which go to manufacture the specified finished excisable goods must be eligible to payment of duty under the same tariff item or sub-item; or else, if such inputs are exigible to tax under different tariff items or sub-items then they must be covered by the specific sanction of the Central Government granting remission or adjustment of duty on those inputs as provided by proviso (ii) (b). Admittedly there is no such specific sanction. The raw materials consumed being excisable under Tariff items different from the one under which the finished products are excisable the appellants have been rightly denied benefit of proforma credit. Assessee appeal dismissed.
Issues:
- Interpretation of Rule 56A regarding proforma credit procedure for excisable goods with different tariff items - Availability of benefit of proforma credit to manufacturers using raw materials under different tariff items than finished products - Examination of conditions under Rule 56A for availing proforma credit - Application of Rule 56A in the case of manufacturing asbestos cement products Analysis: The judgment by the Supreme Court of India involves a detailed analysis of the interpretation and application of Rule 56A concerning the proforma credit procedure for excisable goods with different tariff items. The case revolves around the availability of the benefit of proforma credit to manufacturers whose raw materials are excisable under different tariff items than the finished products. The central issue is whether the appellants, manufacturing asbestos cement products, are entitled to proforma credit under Rule 56A despite using raw materials under different tariff items from the finished products. The Rule 56A, introduced in 1962 and subsequently amended, specifies a special procedure for the movement of duty-paid materials for manufacturing finished excisable goods. The rule empowers the Central Government to notify excisable goods for which the proforma credit procedure applies. To claim this benefit, the finished product must be specified by the government, an application must be made to the Collector, and the raw materials used should not be for goods exempt from duty or chargeable at nil rates. Additionally, the duty on raw materials should align with the finished excisable goods or have specific remission or adjustment sanctioned by the government. The Court emphasized that both provisos of Rule 56A must be satisfied to avail the proforma credit benefit. The language of the rule is clear, requiring compliance with all conditions for eligibility. In this case, as the raw materials (cement and asbestos fiber) used by the appellants are excisable under different tariff items from the finished products, the benefit of proforma credit cannot be claimed. The Court held that specific sanction by the Central Government for remission or adjustment of duty on inputs under different tariff items is necessary, which was absent in this scenario. Ultimately, the Court concurred with the High Court's decision, dismissing the appeal as devoid of merit. The appellants were rightly denied the benefit of proforma credit under Rule 56A due to the non-alignment of raw materials and finished products under the same tariff items. The appeals and special leave petition were also dismissed for the same reasons, with no order as to costs. In conclusion, the judgment clarifies the strict conditions under Rule 56A for availing proforma credit and highlights the importance of alignment between raw materials and finished excisable goods under the same tariff items for eligibility. The case serves as a precedent for manufacturers seeking proforma credit benefits under similar circumstances.
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