1987 (2) TMI 210 - AT - Central Excise

Summary

Issues:
1. Interpretation of Central Excise Law regarding proforma credit for duty paid on inputs.
2. Validity of permission granted by Assistant Collector for utilizing proforma credit.
3. Liability of duty payment on final manufactured products.
4. Retroactive application of duty demand.

Analysis:

Issue 1: Interpretation of Central Excise Law regarding proforma credit for duty paid on inputs
The case involves M/s. Himadri Electrical (Pvt.) Ltd., manufacturers of electric fans, seeking to utilize proforma credit for duty paid on inputs. Initially, they were paying duty on rotors and stators, taking credit for duty paid on stampings and laminations. The Assistant Collector permitted them to take credit for stampings and laminations for payment of duty on final products. However, the permission was later withdrawn, leading to a dispute on the utilization of the credit during the period of permission.

Issue 2: Validity of permission granted by Assistant Collector for utilizing proforma credit
The Assistant Collector granted specific permission for utilizing proforma credit, allowing the appellants to pay duty on final products using credit for inputs. The appellants complied with the granted permission and paid duty accordingly. The contention was that the withdrawal of permission could not retrospectively impact the utilization of credit, as it was granted by the department based on specific circumstances and Trade Notices.

Issue 3: Liability of duty payment on final manufactured products
The Collector held that duty was liable on electric fans and regulators but restricted the period to six months prior to the show cause notice. The appellants were allowed to retain the utilized proforma credit and use the balance as per law. The main argument was that the department could not demand duty on final products during the period of valid permission granted by the Assistant Collector.

Issue 4: Retroactive application of duty demand
Citing precedents from similar cases, the Tribunal emphasized that the relief granted under the permission should not be withdrawn retrospectively. The Tribunal held that the demand made after the withdrawal of permission should not have been confirmed, even for the limited period before the notice. Consequently, the appeal was allowed, and the Collector's order was set aside with consequential relief granted to the appellants.