Credit on duty-paid yarn upheld where separate accounting under Rule 57F allowed utilisation for inputs cleared as such.

Credit of Additional Duties of Excise on yarn already lying in stock was available, and there was no legal bar to keeping that credit in a separate account for use under Rule 57F. The denial failed because it rested on the presumption that the yarn input would necessarily be consumed only in fabric manufacture and could not be removed as such. That assumption was rejected: if the input was not used in manufacture, or was cleared as such or otherwise not accounted for, the separately maintained credit could be applied against duty on the yarn. The denial of credit was therefore unsustainable and was set aside.

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Issues: Whether credit of Additional Duties of Excise on yarn lying in stock could be denied on the ground that the final products were not liable to the same duty, and whether such credit could be maintained in a separate account and utilised in accordance with Rule 57F.

Analysis: The credit on the duty paid yarn was held to be available, and there was no legal bar to maintaining that credit separately. The denial proceeded on an assumption that the yarn input would necessarily be used only in the manufacture of fabrics and could not be cleared as such under Rule 57F. That assumption was rejected because, if the input was not used in manufacture and was removed as such or otherwise not accounted for, the credit kept in a separate account could have been used for the duty on such yarn. A denial based on departmental presumptions, without permitting the Rule 57F movement of the input, was not sustainable.

Conclusion: The denial of credit was set aside and the appeal was allowed in favour of the assessee.

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