1988 (7) TMI 174 - AT - Central Excise

Summary

Issues:
1. Availment of proforma credit under Rule 56A of Central Excise Rules for duty paid on raw materials and component parts.
2. Clearance of refrigerators and air-conditioners without payment of Central Excise duty under Notification No. 186/75-CE for SEEPZ.
3. Recovery of central excise duty on the ground of irregular proforma credit.
4. Validity of demands for duty and time-bar under Rule 56A(5)(i).
5. Interpretation of the first proviso to Rule 56A(2) regarding credit of duty on raw materials and components.
6. Treatment of supply of finished goods to Free Trade Zone as "deemed exports" under Rule 56A(3)(iii).
7. Applicability of Import and Export Policy to Central Excise Rules.
8. Calculation of demands for duty based on findings.

Analysis:
The case involved the appellants availing proforma credit under Rule 56A of Central Excise Rules for duty paid on raw materials and component parts used in manufacturing refrigerators and air-conditioners. Some products were cleared without payment of Central Excise duty under a specific notification for SEEPZ. The Department issued show cause notices to recover duty, alleging irregular proforma credit. The appellants argued that the restriction in the first proviso to Rule 56A applies only if finished goods are fully exempted or charged NIL duty, which was not the case for SEEPZ clearances. They also contended that supplies to SEEPZ were akin to exports, justifying proforma credit. However, the Assistant Collector and Collector of Central Excise (Appeals) disagreed, leading to the appeal.

The appellants argued that they complied with all conditions, and Rule 56A(5) did not justify the duty demands. They cited a Tribunal decision and claimed that if duty was payable, the demand time-limit should start from the proforma credit date, not the show cause notice date. The Department contended that as the assessee took credit themselves, there was no officer error, justifying the demands. The Tribunal examined the records and found no merit in the appellants' case. The first proviso to Rule 56A(2) prohibits credit if finished goods are fully duty exempted, as in the Free Trade Zone case. The Tribunal rejected the appellants' argument of treating Free Trade Zone supplies as "deemed exports," noting the lack of supporting provisions.

Regarding the time-bar issue, the Collector (Appeals) found that demands beyond six months from credit dates lacked special circumstances for extended period invocation, rendering them time-barred. The Tribunal upheld this finding, emphasizing that demands beyond six months were indeed time-barred under Rule 56A(5)(i). Consequently, while dismissing the appeal on merits, the Tribunal directed a recalculation of duty demands based on its findings.