Deemed credit under exemption notification cannot be curtailed by trade notice where manufacturer remains eligible under the notification.

A manufacturer remained entitled to deemed credit under the 01.03.1994 order if it continued to fall within Notification No. 1/93-C.E.; exhaustion of the exemption quantum after clearances of Rs. 75 lakhs did not by itself end eligibility. The High Court held that the order extended to all units availing the notification, so the Tribunal erred in reading it narrowly. It also held that Trade Notice No. 81/94 could not restrict or override the Ministry's deemed credit order, since subordinate administrative guidance cannot curtail the scope of the higher order. The reference was answered in favour of the assessee, and the contrary interpretation was rejected.

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Issues: (i) Whether a manufacturer whose clearances exceeded Rs. 75 lakhs but who remained eligible under Notification No. 1/93-C.E. was entitled to deemed credit under the order dated 01.03.1994. (ii) Whether Trade Notice No. 81/94 dated 25.07.1994 could restrict or override the deemed credit order.

Issue (i): Whether a manufacturer whose clearances exceeded Rs. 75 lakhs but who remained eligible under Notification No. 1/93-C.E. was entitled to deemed credit under the order dated 01.03.1994.

Analysis: The exemption notification covered manufacturers whose preceding financial year clearances did not exceed Rs. 2 crores, though the exemption in the current year was limited in quantum to clearances up to Rs. 75 lakhs. The deemed credit order extended its benefit to all units availing exemption under Notification No. 1/93-C.E. The mere fact that the exemption quantum was exhausted after Rs. 75 lakhs did not mean that such manufacturers ceased to be availing the notification. The Tribunal's narrower reading was therefore incorrect.

Conclusion: The assessee was entitled to avail the deemed credit benefit under the order dated 01.03.1994.

Issue (ii): Whether Trade Notice No. 81/94 dated 25.07.1994 could restrict or override the deemed credit order.

Analysis: A trade notice is subordinate administrative guidance and cannot curtail the scope of a Ministry-issued deemed credit order. The trade notice excluding units whose clearances exceeded Rs. 75 lakhs was inconsistent with the language and effect of the deemed credit order and was therefore impermissible.

Conclusion: The trade notice could not override the deemed credit order and was illegal to that extent.

Final Conclusion: The reference was answered in favour of the assessee, with the Tribunal's contrary interpretation rejected.

Ratio Decidendi: Where an exemption notification identifies the class of eligible manufacturers, a subsequent deemed credit order extending benefit to those availing that notification cannot be narrowed by an administrative trade notice, and the exhaustion of the exemption quantum does not by itself terminate eligibility under the notification.

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