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1987 (8) TMI 250 - AT - Central Excise
Issues:
The issue involves the demand of an amount under Rule 56A, which was taken as proforma credit by the respondents and subsequently utilized against payment of duty on computers manufactured by them. The question is whether the subsequent exemption of computers from duty affects the validity of the credit taken and utilized. Summary: The case revolved around the demand of Rs. 72,825/- by the Assistant Collector from the respondents, which was taken as proforma credit under Rule 56A and utilized for duty payment on computers. The Government's subsequent exemption of computers from duty raised the question of the validity of this credit. The Revenue argued that the exemption made the credit inapplicable, while the respondents contended that the credit was lawfully taken and utilized before the exemption. The Collector invoked Rule 56A(2) and the proviso, stating that no credit is allowed if finished goods are exempt from duty, and Rule 56A(3)(v) requiring payment if materials are not accounted for properly. The respondents relied on a trade notice and argued that the credit was lawfully allowed and utilized as per Rule 56A provisions. They emphasized that the credit was correctly allowed and utilized, with no mistake or misdirection. The Board's clarification in the trade notice supported their position that strict input/output correlation was not required for credit utilization. The absence of a judicial decision directly applicable led to a decision based on first principles and relevant guidance. The Tribunal found that the respondents acted in good faith and in accordance with Rule 56A provisions when taking and utilizing the credit. Since there was no irregularity at the time of credit allowance or utilization, and Rule 56A did not specifically provide for such a situation, the Department lacked authority to demand back the credit due to the subsequent duty exemption on computers. The appeal was rejected, upholding the Collector (Appeals) decision in favor of the respondents.
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