Deemed Modvat credit under exemption scheme cannot be denied merely because clearances cross the prescribed limit.

Deemed Modvat credit remained available to re-rollers covered by Notification No. 1/93-CE even after clearances crossed the Rs. 75 lakh limit, because the exemption scheme continued to apply to units within the class covered by the notification. The quantum limit did not by itself terminate entitlement to the exemption, and an executive trade notice could not narrow the benefit granted by the deemed credit order. On that basis, denial of deemed credit was treated as unsustainable and consequential relief followed.

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Issues: Whether the assessee was entitled to deemed Modvat credit on ingots and re-rollable materials after its clearances crossed Rs. 75 lakhs while it continued to avail exemption under Notification No. 1/93-CE.

Analysis: The deemed credit order extended credit to re-rollers availing exemption under Notification No. 1/93-CE, and the relevant eligibility depended on whether the manufacturer fell within the class of units covered by that notification. The limitation of the quantum of exempt clearances under the notification did not mean that a unit crossing Rs. 75 lakhs ceased to avail the exemption altogether. The Court followed the view of the High Court on the same issue and held that the trade notice relied upon by the revenue could not restrict the benefit granted by the deemed credit order.

Conclusion: The assessee was entitled to the deemed credit benefit and the denial of credit was unsustainable.

Final Conclusion: The demands and the impugned orders were set aside, and the appeals were allowed with consequential relief.

Ratio Decidendi: A unit continuing to fall within the exemption scheme under Notification No. 1/93-CE cannot be denied deemed credit merely because its clearances exceed Rs. 75 lakhs, and an executive trade notice cannot curtail the benefit granted by the deemed credit order.

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