Proforma credit under Central Excise rules allowed for duty-paid inputs, making the demand revenue neutral and unsustainable.

Proforma credit under Rule 56A of the Central Excise Rules, 1944 was available for additional customs duty paid on copper wire bars used to manufacture copper wire rods, because both products were covered by the rule and attracted the same specific rate of duty. On that basis, the credit fully offset the duty on the finished rods, making the transaction revenue neutral and leaving no net duty liability. The objection that the duty-paid nature of the wire bars was unproved was rejected, as the department had proceeded on the footing that the bars were imported and had suffered additional customs duty, and the show cause notices did not dispute that character; the RT-12 returns also supported acceptance of duty payment.

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Issues: Whether the assessee was entitled to proforma credit under Rule 56A of the Central Excise Rules, 1944 in respect of additional customs duty paid on copper wire bars used for manufacture of copper wire rods, and whether the demand could survive when the duty liability was revenue neutral.

Analysis: Copper wire bars and copper wire rods were both covered by Rule 56A and attracted the same specific rate of duty. On that basis, credit of the additional customs duty paid on the wire bars was available for payment of duty on the wire rods, making the entire exercise revenue neutral and leaving no net duty liability. The department's objection that the duty-paid character of the wire bars was not proved was not accepted, because the department itself proceeded on the basis that the bars were imported and had suffered additional customs duty, and the show cause notices did not dispute their duty-paid nature. The filing and assessment of RT-12 returns also supported the conclusion that the duty-paid character was accepted at the relevant time.

Conclusion: The assessee was entitled to proforma credit and the demand could not be sustained.

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