1988 (8) TMI 314 - AT - Central Excise

Summary

Issues:
- Availability of proforma credit of duty under Notification No. 95/79-C.E. for inputs used in the manufacture of tyres supplied to original equipment manufacturers.
- Interpretation of Rule 56-A and Rule 11-B of the Central Excise Rules.
- Applicability of time limit for restoration of credits expunged by Central Excise officer.
- Impact of amending Notification No. 58/82-CE dated 28.2.1982 on proforma credit availability.
- Relevance of Tribunal decision in Vikrant Tyres Ltd. v. Collector of Central Excise, Bangalore [1985 (21) E.L.T. 620 (Tribunal)].

Analysis:

The judgment concerns the availability of proforma credit of duty under Notification No. 95/79-C.E. for inputs used in manufacturing tyres supplied to original equipment manufacturers. The Collector (Appeals) held that such credit was not available during the relevant period due to the exemption of tyres from duty. The Collector also noted that Rule 56-A prohibits proforma credit if the final product is fully exempt from Central Excise duty. Additionally, the Collector clarified that Rule 11-B does not apply to the restoration of credits expunged by Central Excise officers.

The appellants, although absent during the hearing, contended in written appeals that they availed proforma credit under the notification and not Rule 56-A. They argued that the notification did not impose conditions on credit availability for duty-free final products. They highlighted that tyres for the replacement market were not duty-exempt, making them eligible for set-off under the notification. They also asserted that the restoration of credits expunged by officers was not subject to a six-month time limit.

The Tribunal considered the arguments and the Department's position. It reviewed Notification No. 95/79-C.E., which exempted certain final products from duty based on duty paid on specific inputs. The Tribunal noted the provisos under the notification, emphasizing the linkage between inputs and final products for exemption eligibility. The Tribunal highlighted the amendments brought by Notification No. 58/82-CE, which included synthetic rubber, carbon black, and rubber processing chemicals for tyres in the exemption list.

Regarding proforma credit availability, the Tribunal referred to the second proviso of Notification No. 95/79, which restricted exemption if the final product's duty was less than the duty paid on inputs. This restriction applied to tyres supplied to original equipment manufacturers exempt from Central Excise duty. The Tribunal cited the Vikrant Tyres Ltd. case, supporting the view that duty set-off is not available for inputs used in fully exempted final products.

In conclusion, the Tribunal upheld the Collector's decision, citing the unavailability of proforma credit for inputs used in tyres supplied to original equipment manufacturers exempt from duty. The judgment underscores the importance of aligning input-duty relationships for exemption eligibility and adhering to relevant Tribunal precedents in interpreting duty set-off provisions.