Deemed Cenvat credit under the compounded levy scheme was unavailable where the notification expressly excluded special-procedure manufacturers.

An assessee opting for the compounded levy special procedure under Rules 96ZNA to 96ZND of the Central Excise Rules, 1944 was not entitled to deemed Cenvat credit on clearances made after 1-5-2001 of goods already in stock on that date. Paragraph 4A of Notification No. 7/2001-C.E., as amended, excluded manufacturers availing that special procedure, and the provisions relied on by the assessee did not override that exclusion. Credit taken on clearances of processed fabrics manufactured before 1-5-2001 was therefore inconsistent with the scheme, and the refund-settling order was upheld.

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Issues: Whether an assessee opting for the compounded levy scheme and paying duty at the specified rate under the special procedure was entitled to avail deemed Cenvat credit on clearances made after 1-5-2001 of goods already in stock on that date.

Analysis: The entitlement to deemed Cenvat credit was examined in the context of Rules 96ZNA to 96ZND of the Central Excise Rules, 1944, Rule 57AK of the Central Excise Rules, 1944, and the relevant notifications governing the special procedure. The restriction in paragraph 4A of Notification No. 7/2001-C.E. dated 01-03-2001, as amended, excluded application of that notification to manufacturers availing the special procedure under Rule 96ZNA. The provisions relied upon by the assessee did not override that exclusion, and the credit taken on clearances of processed fabrics manufactured prior to 1-5-2001 was inconsistent with the scheme.

Conclusion: The assessee was not eligible to avail deemed Cenvat credit in the stated circumstances, and the order setting aside the refund was correct.

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