2009 (4) TMI 62 - HC - Central Excise

High Court upholds petitioner's right to deemed credit benefit under exemption notification, deems trade note restrictions illegal

The High Court ruled in favor of the petitioner, holding that manufacturers meeting the criteria of the exemption notification were entitled to the deemed ... Interpretation of the Deemed Credit Order issued by Excise Ministry dated 1.3.94 vis-a-vis., Not. No.1/93-C.E. and effect of the trade note No.81/94 issued by the Chandigarh Central Excise Collectorate - No doubt the benefits under this notification were limited to clearances of Rs.75 lacs but this does not mean that manufacturers whose clearances exceeded Rs.75 lacs were not availing the exemption under the notification – held that the trade note No.81/94 limiting this benefit to those manufacturers whose clearances do not exceed Rs.75 lacs is totally illegal and against the deemed credit order issued by the Ministry - though the department may be bound by its trade note, the industry is not bound by the same - petitioner was entitled to avail benefit of the deemed credit order since he was availing benefit of the notification dated 28.2.1993. Issues:Interpretation of Notification No.1/93-C.E. dated 28.2.1993 and Deemed Credit Order dated 1.3.1994.Interpretation of provisions of Rule 57A and 57G regarding Deemed Credit Benefit.Interpretation of Chandigarh Central Excise Collectorate Trade Note No.81/94 dated 25.7.1994 overriding previous notifications.Analysis:The primary issue in this case revolves around the interpretation of the Deemed Credit Order dated 1.3.1994 in relation to the exemption notification No.1/93-C.E. dated 28.2.1993 and the impact of the trade note issued by the Chandigarh Central Excise Collectorate on 25.7.1994. Under the exemption notification, specified goods up to a certain value enjoyed full or concessional exemption from Central Excise Duty, subject to specific conditions. The exemption was not available if the total clearances exceeded a certain limit in the preceding financial year. The notification outlined varying levels of exemption based on the value of clearances, with no exemption available for clearances exceeding a specified amount.The Deemed Credit Order issued later provided for deemed payment of duty on certain materials purchased by manufacturers availing the exemption under the notification. However, a trade notice subsequently restricted the benefit of deemed credit for re-rolling units whose clearances exceeded a certain value. This restriction led to a denial of deemed credit benefit to a petitioner whose total clearances surpassed the specified limit. The Commissioner relied on previous tribunal decisions to support this denial, which was later upheld by a Larger Bench of CEGAT.The High Court, however, disagreed with the interpretation of the CEGAT. It held that any manufacturer meeting the criteria of the exemption notification was entitled to the benefit of the deemed credit order, regardless of the total clearances exceeding a certain value. The Court emphasized that the trade note imposing such restrictions was illegal and contrary to the deemed credit order issued by the Ministry. Manufacturers complying with the criteria of the exemption notification were deemed to be availing the benefit, irrespective of the total clearances exceeding specified limits. Therefore, the Court concluded that the petitioner was entitled to avail the deemed credit benefit as they were complying with the terms of the exemption notification.In conclusion, the High Court ruled that the trade note could not override the deemed credit order, and it deemed the trade note as illegal. The Court's interpretation favored the petitioner's entitlement to the deemed credit benefit, emphasizing compliance with the terms of the exemption notification as the determining factor for eligibility.