Deemed credit under excise notification need not be bifurcated between duty heads; demand and penalty failed.

Notification No. 6/2002-CE(NT) permitted deemed credit at a fixed percentage of the aggregate duty of excise and additional duty of excise, and it did not require segregation of the aggregate into separate basic excise duty and additional excise duty heads. Credit could be utilised for payment of either duty without differentiation, so a demand based only on the assessee's accounting treatment had no basis in the notification. The matter was also revenue neutral, as the duty incidence would be the same even if the credit had been booked differently. The proposed demand, interest and penalty were therefore unsustainable.

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Issues: Whether, under Notification No. 6/2002-CE(NT) dated 01.03.2002, the assessee was required to bifurcate deemed credit between basic excise duty and additional excise duty, and whether denial of credit on that basis, with consequential duty, interest and penalty, was sustainable.

Analysis: The notification allowed deemed credit at 33 1/3 per cent or 66 2/3 per cent of the aggregate of the duty of excise leviable under the Central Excise Act, 1944 and the additional duty of excise leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The text of the notification did not require segregation of the aggregate amount into separate heads of basic excise duty and additional excise duty. The credit so deemed could be utilised towards payment of duty of excise or additional duty of excise without any differentiation, and the demand was based only on an accounting treatment not found in the notification. The matter was also revenue neutral, since the same duty incidence would arise even if credit had been booked differently.

Conclusion: The assessee was not required to bifurcate the deemed credit, and the demand, interest and penalty were unsustainable.

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