Deemed credit on stock inputs after abolition of compounded levy scheme upheld where records and circular support entitlement.

Assessees were entitled to deemed credit on inputs lying in stock on 1-4-2000 after abolition of the compounded levy scheme, where stock records were maintained and the inputs had been purchased from units operating under that scheme. Board Circular No. 522/2000 permitted similarly placed assessees to avail such credit, and the departmental authorities did not dispute the quantum or object when the credit was intimated in advance and reflected in returns. Denial of the credit was therefore held to be not legal or proper, and the entitlement to deemed credit was upheld.

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Issues: Whether the appellants were entitled to deemed credit in respect of inputs lying in stock on 1-4-2000 after abolition of the compounded levy scheme, and whether denial of such credit was justified.

Analysis: The appellants had maintained stock records of the inputs as on 1-4-2000 and the inputs had been purchased from units functioning under the compounded levy scheme, which had been abolished from 31-3-2000. Board's Circular No. 522/2000, dated 31-3-2000 permitted assessees similarly situated to take deemed credit of duty on such inputs. The quantum of credit taken was not disputed, and the departmental authorities had remained silent despite the appellants' intimation before taking credit and reflection of the same in returns.

Conclusion: The denial proceedings were held to be not legal and proper, and the appellants were found entitled to the credit.

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