2018 (1) TMI 1210 - HC - Central Excise

High Court rules in favor of appellant on deemed credit entitlement, sets aside penalty and demand.

The High Court allowed the appeal, ruling in favor of the appellant, confirming their entitlement to the benefit of deemed credit under the specified ... Deemed credit - Whether the Appellate Tribunal was right, under the facts and circumstances of the case, in denying the benefit of Deemed Credit in terms of the Government of India’s Order No. TS/36/94/TRU, dated 1-3-1994 to the appellants after their crossing the value of clearances of ₹ 75.00 Lacs under N/N. 1/93-C.E., dated 28-2-1993 as amended? Held that: - the submission of the learned Counsel for the Revenue is devoid of merit and is contrary to the Notification dated 1st March, 1994, issued by the Central Government, in exercise of the powers conferred under the second proviso to Rule 57G(2) of the Central Excise Rules, 1944, directing that the ingots and re-rollable materials of iron or steel purchased from outside and lying in stock on or after the 1st day of April, 1994, with the re-rollers, availing of the exemption under N/N. 1/93-Central Excises, dated the 28th February, 1993, will be deemed to have paid duty and the credit of duty in respect of such ingots and re-rollable materials used without undergoing the process of melting, in the manufacture of goods falling under Chapters 72 and 73 of the Schedule to the Central Excise Tariff Act, 1985, may be allowed at the rate of ₹ 920/- per tonne, without production of documents evidencing the payment of duty. In our view, in view of this Notification dated 1st March, 1994, the appellant was not required to produce the documents evidencing the payment of duty while availing of exemption under the Notification No. 1/93-Central Excises, dated 28th February, 1993. Impugned order set aside - appeal allowed. Issues Involved:- Denial of benefit of Deemed Credit under Government of India's Order No. TS/36/94/TRU, dated 1-3-1994- Applicability of Notification No. 1/93-C.E., dated 28-2-1993- Validity of demand for Rs. 3.73 lakh by the Superintendent, Central Excise and Customs- Imposition of penalty of Rs. 30,000 under Rule 173Q of the Central Excise Rules, 1944Detailed Analysis:1. Denial of Deemed Credit:The primary issue was whether the Appellate Tribunal was correct in denying the benefit of Deemed Credit to the appellant after their clearances exceeded Rs. 75 lakh under Notification No. 1/93-C.E. The appellant, a Small Scale Industrial (SSI) unit, was availing the benefit of slab-wise exemption and deemed credit at Rs. 920 per Metric Tonne for re-rollable steel scrap. However, upon crossing the clearance value of Rs. 75 lakh, the Superintendent of Central Excise issued a show cause notice alleging that the appellant was not entitled to deemed credit beyond this limit, as per the Government of India’s order dated 1-3-1994.2. Applicability of Notification No. 1/93-C.E.:The appellant argued that they were still entitled to the deemed credit as their total clearances did not exceed Rs. 2 crore, as specified in Notification No. 1/93-C.E. The Commissioner (Appeals) had initially ruled in favor of the appellant, allowing deemed credit even after crossing Rs. 75 lakh, provided the clearances were below Rs. 2 crore. However, the Tribunal later reversed this decision, referencing the Larger Bench decision in Digambar Foundry, which held that units exceeding Rs. 75 lakh in clearances were not eligible for deemed credit.3. Validity of Demand for Rs. 3.73 Lakh:The Tribunal upheld the demand for Rs. 3.73 lakh but set aside the penalty of Rs. 30,000. The appellant contended that the demand was invalid as they were entitled to deemed credit under the Notification. The High Court reviewed judgments from various High Courts, including those in Vinubhai Steel Co. Pvt. Ltd., Accurex Steel Rolling Mills, Ganesh Steels, and Sood Steel Industrial (P) Ltd., which supported the appellant’s position that deemed credit was available up to Rs. 2 crore in clearances.4. Imposition of Penalty:The Additional Commissioner had imposed a penalty of Rs. 30,000 on the appellant for availing deemed credit beyond the limit of Rs. 75 lakh. The Tribunal later set aside this penalty, a decision that was not contested by the Revenue.Conclusion:The High Court concluded that the appellant was entitled to the benefit of deemed credit as their clearances were below Rs. 2 crore, aligning with the judgments of other High Courts. The Tribunal’s reliance on the Larger Bench decision in Digambar Foundry was deemed incorrect. The High Court set aside the Tribunal’s order upholding the demand of Rs. 3.73 lakh, confirming that the appellant was eligible for deemed credit under Notification No. 1/93-C.E. The penalty set aside by the Tribunal remained unchallenged and was upheld.Final Judgment:The High Court allowed the appeal, ruling in favor of the appellant and against the Revenue, confirming that the appellant was entitled to the benefit of deemed credit under the specified notifications. No costs were ordered.