Proforma credit under Rule 56A did not trigger duty recovery on inputs cleared as such, and no penalty was justified.

Proforma credit under Rule 56A did not, by itself, create duty liability when inputs were later cleared as such and the credit account was merely debited. Because the record did not show that the credit had been used to pay duty on final products, clearance of the inputs did not attract recovery of duty on that basis. In the absence of any established wrongful utilisation of credit, no penalty was sustainable. The note states that no duty was recoverable and no penalty was imposable on the assessee.

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Issues: Whether duty and penalty were recoverable when inputs were cleared as such after taking proforma credit under Rule 56A, and whether omission of the rule defeated the right to such credit.

Analysis: The inputs were received and later removed as such from the factory by debiting the credit account. The record did not show that the credit had been used to pay duty on any final product. In these circumstances, the clearance of the inputs as such did not give rise to a duty liability merely because the credit entry had been made, and no penalty could follow where no wrongful utilisation of credit for final products was established.

Conclusion: No duty was recoverable and no penalty was imposable on the assessee.

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