Proforma credit of auxiliary excise duty was available for use against basic duty on the finished product.

Auxiliary excise duty paid on an optical bleaching agent could be taken as proforma credit under Rule 56A and utilised to discharge basic excise duty on the finished product, because auxiliary duty is itself a duty of excise and its character does not bar set-off against duty on finished excisable goods. The later amendment by Notification No. 4/78 clarified this position by expressly allowing credit for payment of duty on any finished excisable goods. The exemption notification covering the input did not defeat the credit claim, as the input was not cleared under that notification for the purpose of the credit issue. The credit was therefore available for use against the finished product.

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Issues: Whether proforma credit of auxiliary excise duty paid on optical bleaching agent could be utilised for payment of basic excise duty on the finished product, and whether the exemption notification covering the input negatived such credit.

Analysis: Auxiliary duty is also a duty of excise and, for the purpose of the credit scheme under Rule 56A, the character of the duty does not prevent its utilisation towards duty on finished excisable goods. The amendment introduced by Notification No. 4/78 made the position explicit by permitting credit to be used for payment of duty on any finished excisable goods. The exemption notification relied upon by the appellant did not assist the claim that the auxiliary duty on the input became nonexistent in the hands of the appellant, because the clearance of the input was not made under that notification for the purpose of the present credit claim.

Conclusion: The credit of auxiliary duty paid on the input was available and could be used for payment of basic duty on the finished product.

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