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TMI Blog1991 (1) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs used in the manufacture of a final product shall be allowed if that final product is exempt from duty or chargeable to nil rate of duty. In their appeal before the Collector (Appeals) it was submitted by them that duty paid on the inputs received and utilised in the manufacture of final products which were cleared on payment of duty could not be disallowed on the ground that some inputs were in stock on 1-3-1988 and therefore, they were used only in the manufacture of exempted products. On the inputs required for the manufacture of the exempted goods which they received after 1-3-1988, they had not taken credit but the utilisation of credit before 1-3-1988 when the said goods were not exempted was correct and legal. They had referred to the decision of the South Regional Bench of the Tribunal in Collector of Central Excise v. Wipro reported in 1988 (33) E.L.T. 172 and claimed that going by the ratio of the said decision their appeal should be allowed. The Collector (Appeals) upheld the order of the Assistant Collector observing, inter alia, that the appellants reliance on the Wipro decision of the Tribunal was not relevant since the facts were different. Thereby the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts were dutiable without insisting on one-to-one correlation that was only a working arrangement granting procedural relaxation. Though one-to-one correlation was not to be insisted upon, there should be broad correlation. This, however, cannot be said to have been fulfilled when the goods became exempt. As long as the final products were dutiable, then the utilisation of credit for payment of duty thereon was allowed without insisting on strict correlation between the outputs and the inputs used for their manufacture. But, when the final products became exempt, the position completely changed and Rule 57C came into play. The demand for duty had been correctly raised and correctly upheld by the Collector (Appeals). He pleaded that the appeal may be dismissed and the order of Collector (Appeals) sustained. 5. We have considered the submissions made by both the sides and perused the record. We have also gone through the Wipro decision [reported in 1988 (33) E.L.T. 172 (Tribunal)] relied upon by the appellants. We find that the Collector (Appeals) has merely observed that their reliance on the said decision is not relevant because the facts are different. He has not spelt out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice in proforma credit availment of fully utilising the proforma credit against the duty payable on the products provided that as a genus they are the goods in the manufacture of which the inputs are utilised. They examined the question whether there was anything in Rule 56A which authorised the Department to take back the duty credit on the ground that the respondents became disentitled to it because of the subsequent exemption from duty granted in respect of computers and found that Rule 56A did not specifically provide for a case of this nature. In the circumstances, the Tribunal rejected the appeal by the Collector observing that it may be that Government by oversight omitted to provide for cancellation or taking back of the credit in cases like this. 7. The provisions of the relevant sub-rules of Rule 56A which were taken into account in the Wipro case discussed above bear a close similarity with the Rules applied by the lower authorities in the present case. Thus, the first proviso to sub-rule (2) of Rule 56A is similar to Rule 57C in ruling out the credit where the final product is exempt from duty. Their observation that the Government by oversight might have omitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at scheme on a par with the set-off procedure with its strict correlation between input and final product which had been dispensed with by executive instructions. But the executive instructions and procedural relaxations cannot go beyond the statutory stipulations. The latter are represented by Rules 57F(3) and 57C. There is no doubt that, going by Rule 57C, no credit of duty will be permissible if the inputs are used in the manufacture of wholly exempted goods. Thus, if a manufacturer has got unutilised inputs and also unutilised credits, the latter has to be disallowed if the final products become exempt. There is no escape from that, in terms of Rule 57C. Simply because another manufacturer has, with alacrity, utilised the credit before utilising the inputs themselves he cannot be given a more favoured treatment, unless the law allows him the same. It is here that the strict construction of the relevant provisions comes into play. In view of our discussion of Rule 57F(3), we feel the strict apportionment of credit of duty paid on inputs for utilisation for payment of duty on the final product arising from them is inherent therein. The liberal treatment of allowing the credit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment was not of direct relevance to the said case as the relevant provisions had been amended. The relevant paragraphs of the said judgment are extracted below: Quote 2. What is contended on behalf of the petitioner, there is no obligation that the imported Rock Phosphates must be utilised in one and the same process and so long as it is properly accounted for, there is every satisfaction of Rule 56A(3)(vi). As against this, the department takes the stand that there must be a correlation between the actual quantity of the goods imported and the ultimate product, that, according to the department, is the real purport and intent of Rule 56A(3)(vi). 3. In order to appreciate the respective contentions, let me extract Rule 56A(3)(vi):- Except to the extent provided in the second proviso to sub-rule (2) the credit allowed in respect of any material or component parts shall be utilised towards payment of duty on the finished excisable goods in the manufacture of which such materials or component parts are used ;or on the materials or component parts themselves and no part of such credit shall be refunded in cash or by cheque. By a reading of this rule, I do not get t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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