2013 (5) TMI 37 - HC - Central Excise

High Court allows deemed credit under Notification No. 01/93-CE beyond Rs. 75 lakhs limit

M/s. Ganesh Steels Versus The Customs Excise and Service Tax Appellate Tribunal

The High Court set aside the Tribunal's order, ruling in favor of the appellant that units availing the exemption under Notification No. 01/93-CE are ... Entitlement of deemed credit – availing benefit of Notification No.01/93-CE – Appellant SSI manufacturer availed MODVAT Credit for the inputs used in the manufacture of final products and also availed deemed credit on the ingots and re-rollable materials of iron and steel purchased from outside. As per Board's letter F.No.TS/36/94 the re-rollers availing the exemption under Notification No.1/93-CE were eligible for availing the Deemed Credit on the inputs. Revenue denied the same. In the appeal preferred by the Appellant, following the decision of the Tribunal in Digambar Foundary v. CCE, [2000 (3) TMI – 78], the Tribunal held that the aggregate value of clearances in the financial year had exceeded ₹ 75 lakhs and Appellant was not eligible for the benefit. Held that - In the present case, Appellant is a SSI manufacturer who can availed the benefit up to the given value limit i.e. ₹ 75 lakhs will continue to be categorised as one still availing and entitled to the benefits of the Notification even after the value limit is crossed and also the same has not crossed the value of clearance of ₹ 200 lakhs during the preceding financial year and availed full exemption under Notification No.1/93-CE and thereafter started paying duty. Therefore, Appellant cannot said to be not availing exemption under Notification. The Deputy Commissioner had recorded factual finding that the Appellant satisfied the conditions Notification No.1/93-CE and Ministry's Deemed Credit Order TS/36/94 TRU and applying the ratio laid down by the Division Bench of Himachal Pradesh High Court in Sood Steel Industrial (P) Limited v. Commissioner of Central Excise [2009 (4) TMI-62]. Thus, the order of Tribunal cannot be sustained. Appeal is allowed. Issues Involved:1. Entitlement to Deemed Credit under Notification No. 01/93-Central Excise dated 28.02.1993 and Ministry's Order TS/36/94-TRU dated 01.03.1994 after crossing the clearance value of Rs. 75 lakhs.2. Validity of Tribunal's rejection of the appeal based on a larger bench decision, despite subsequent conflicting decisions.3. Tribunal's authority to proceed with the appeal while a Reference Case on the same issue is pending before the High Court.4. Scope of exemption/concession under Notification No. 01/93-CE dated 28.02.1993, whether limited to Rs. 75 lakhs or extended up to Rs. 2 crores.Detailed Analysis:1. Entitlement to Deemed Credit:The primary issue is whether the appellant is entitled to Deemed Credit under Notification No. 01/93-CE and Ministry's Order TS/36/94-TRU after exceeding the Rs. 75 lakhs clearance threshold. The appellant argued that they should continue to receive benefits even after crossing this limit if the total clearances in the preceding financial year did not exceed Rs. 200 lakhs. The Ministry's Deemed Credit Order allows deemed credit for re-rollers availing the exemption under Notification No. 01/93-CE, irrespective of crossing the Rs. 75 lakhs limit, provided the total clearance in the previous year did not exceed Rs. 200 lakhs.2. Validity of Tribunal's Rejection:The Tribunal rejected the appellant's claim based on the larger bench decision in Digambar Foundary [2000 (118) E.L.T. 85], which held that units exceeding Rs. 75 lakhs in clearances were not eligible for deemed credit. However, the Himachal Pradesh High Court in Sood Steel Industrial (P) Limited v. Commissioner of Central Excise [2009 (241) E.L.T. 186 (H.P.)] disagreed with this interpretation, stating that the benefit of deemed credit should be available to units availing the exemption under Notification No. 01/93-CE, regardless of crossing the Rs. 75 lakhs limit.3. Tribunal's Authority During Pending Reference Case:The appellant questioned whether the Tribunal could proceed with the appeal while a Reference Case on the same issue was pending before the High Court. The judgment does not explicitly address this procedural issue, focusing instead on the substantive entitlement to deemed credit.4. Scope of Exemption/Concession:The exemption under Notification No. 01/93-CE is limited to clearances not exceeding Rs. 75 lakhs, but the total clearances in the preceding financial year must not exceed Rs. 200 lakhs for the unit to be eligible. The appellant met these conditions, as their clearances in the preceding financial year did not exceed Rs. 200 lakhs, and they availed full exemption up to Rs. 75 lakhs before paying the applicable duty.Conclusion:The High Court set aside the Tribunal's order, agreeing with the Himachal Pradesh High Court's interpretation that units availing the exemption under Notification No. 01/93-CE are entitled to deemed credit even after crossing the Rs. 75 lakhs limit, provided the total clearances in the preceding financial year did not exceed Rs. 200 lakhs. The appeal was allowed, and the questions of law were answered in favor of the appellant.