1985 (6) TMI 130 - AT - Central Excise

Summary

Issues Involved:

1. Entitlement to proforma credit under Rule 56A of the Central Excise Rules, 1944.
2. Compliance with procedural requirements for availing proforma credit.
3. Validity of conditions imposed by Trade Notices.

Issue-wise Detailed Analysis:

1. Entitlement to proforma credit under Rule 56A of the Central Excise Rules, 1944:

The primary issue was whether Paints Ltd. could avail proforma credit of the duty paid on V.N.E. Oils used in manufacturing paints and varnishes, despite the gate passes for the raw materials being in the name of M/s. Allana Sons Pvt. Ltd., the distributors, and not directly in the name of Paints Ltd. The Assistant Collector had rejected Paints Ltd.'s claim, stating that they failed to obtain raw materials directly from the manufacturer under separate gate passes in their name or through endorsed gate passes from the distributors. However, the Collector (Appeals) overturned this decision, holding that Paints Ltd. were entitled to proforma credit as they had complied with the essential requirements of Rule 56A.

2. Compliance with procedural requirements for availing proforma credit:

The procedural requirements under Rule 56A(3) for availing proforma credit include:
- Giving prior notice (D-3 intimation) to the proper officer of the receipt of inputs.
- Bringing inputs to the factory in original packing under the cover of A.R. 1 or G.P. 1.
- Producing inputs before the proper officer for verification.
- Maintaining accounts in form R.G. 23 Parts I and II.
- Ensuring adequate credit balance to cover duty on finished goods.
- Limiting total stock of inputs to the quantity used in the previous two years.

Paints Ltd. contended that they had complied with these requirements, including furnishing D-3 intimations and producing gate passes and certificates from M/s. Allana Sons Pvt. Ltd. The Collector (Appeals) found that Paints Ltd. had substantially complied with these procedural requirements, despite the gate passes not being directly in their name.

3. Validity of conditions imposed by Trade Notices:

The Assistant Collector and the departmental representative relied on Trade Notice No. 77/81, which required that inputs should be received directly from the manufacturer or through endorsed gate passes from distributors. However, the Collector (Appeals) and Paints Ltd. argued that Trade Notices are not statutory and cannot impose conditions more onerous than those in the Rules. The judgment noted that Trade Notices are clarificatory and intended to aid compliance but do not have statutory force. The judgment emphasized that Rule 56A does not specifically require gate passes to be in the name of the manufacturer claiming proforma credit or endorsed accordingly. The judgment concluded that substantial compliance with Rule 56A and ensuring no double availing of proforma credit or non-duty-paid inputs were the primary concerns.

Conclusion:

The judgment upheld the decision of the Collector (Appeals), rejecting the appeal by the Collector of Central Excise, Bombay-I. It affirmed that Paints Ltd. were entitled to proforma credit as they had substantially complied with Rule 56A's requirements and that the conditions imposed by Trade Notices were not statutory and could not override the provisions of the Rules. The appeal was dismissed, and the order of the Collector (Appeals) was upheld, allowing Paints Ltd. to avail the proforma credit.