2005 (1) TMI 279 - AT - Central Excise

Summary

Issues:
- Deemed credit under Notification No. 29/96
- Denial of credit by lower authorities
- Applicability of Rule 57G
- Entitlement of credit at the time of removal of final product
- Precedent of Kirloskar Brothers Ltd. case
- Decision and appeal outcome

Deemed Credit under Notification No. 29/96:
The appellant, a manufacturer of MMF, exported processed fabrics without taking deemed credit under Notification No. 29/96 initially, believing it was only available upon actual payment of Excise duties. Subsequently, they entered the credit in the Deemed Credit Register for the exported goods upon realizing its availability. The issue arose when the Central Government introduced the Compounded Levy Scheme, leading to a show cause notice for recovery/reversal of the deemed credit taken after 17 months, amounting to Rs. 46,97,771.

Denial of Credit by Lower Authorities:
The lower authorities denied the credit, citing that entries in the deemed credit register were not made at the time of final product clearance. The Commissioner (Appeals) upheld the denial based on the delay in taking deemed credit, considering it not legally permissible. However, the penalty was set aside as the credit was not utilized.

Applicability of Rule 57G and Entitlement of Credit:
Upon considering the issue, it was found that there was no explicit bar in Notification No. 29/96 against textile processors taking deemed credit later than the actual clearance of processed fabrics. The bar of Rule 57G was deemed inapplicable as the documents for deemed credit were not subject to the rule's limitation of six months. The entitlement of credit was linked to the removal of the final product, distinguishing it from cases involving input receipt.

Precedent of Kirloskar Brothers Ltd. Case:
Referring to the decision in Kirloskar Brothers Ltd. case, where credit was allowed for bona fide errors or misunderstandings of the law, the Tribunal ruled in favor of allowing the credit in the present case. The Tribunal highlighted that the appellant's belated credit claim was justified under this precedent, and no evidence was presented to refute the allowance of credit.

Decision and Appeal Outcome:
Considering the arguments and precedents, the Tribunal set aside the previous orders and allowed the appeal, emphasizing that the credit should be granted despite the delay in its claim. The judgment was pronounced in court, marking the conclusion of the case.