2009 (7) TMI 1067 - AT - Central Excise

Summary

Issues:
1. Transfer of unutilized credit from set-off register to proforma credit register.
2. Interpretation of Notification 432/86-C.E. regarding duty set-off.
3. Applicability of one-to-one correlation between input and final product for duty set-off.
4. Validity of transferring input duty credit between set-off and proforma credit schemes.

Issue 1: Transfer of unutilized credit from set-off register to proforma credit register
The appellant, engaged in manufacturing beta-Naphthol, applied for permission to avail proforma credit under Rule 56A of the Central Excise Rules, 1944. The Assistant Collector granted permission but later issued a show-cause notice for recovery of unutilized credit transferred to the proforma credit register. The Commissioner disallowed the credit, leading to an appeal. The Tribunal previously allowed proforma credit for a specific period and remanded the issue of credit transfer. The Commissioner disallowed a portion of the credit and ordered recovery, leading to the present appeal against the demand.

Issue 2: Interpretation of Notification 432/86-C.E. regarding duty set-off
The appellant argued that under Notification 432/86-C.E., they were entitled to set-off duty paid on naphthalene against any demand on beta-Naphthol without a one-to-one correlation between input and final product. The Revenue contended that the notification did not permit transferring input duty credit between registers. The Tribunal analyzed the notification, emphasizing that it exempted specified goods from excise duty equivalent to duty paid on specified inputs used in the final product's manufacture.

Issue 3: Applicability of one-to-one correlation between input and final product for duty set-off
The Tribunal referred to previous decisions, including Amar Dye Chem. Ltd., which ruled out a one-to-one correlation between inputs and final products under Notification 432/86-C.E. It held that the appellant was entitled to set-off duty paid on naphthalene against any duty demand on beta-Naphthol, even without transferring the credit to the proforma credit register.

Issue 4: Validity of transferring input duty credit between set-off and proforma credit schemes
The Tribunal noted that both the set-off and proforma credit schemes were in parallel operation until the latter was superseded by the Modvat scheme in 1994. The appellant was allowed to choose the proforma credit scheme from a specific date. The Tribunal concluded that even though the notification did not explicitly allow transferring input duty credit, such transfer would not prejudice the Revenue. It interpreted the provisions in a justice-oriented manner and set aside the demand, allowing the appeal.

This detailed analysis of the judgment covers the issues related to the transfer of credit between registers, interpretation of duty set-off provisions, the requirement of one-to-one correlation, and the validity of transferring input duty credit between different excise schemes.