Deemed credit and reversal of earlier credit: notification terms control eligibility where no express bar on reversal exists.

Deemed credit under Notification No. 29/96-CE (N.T.), as amended, was examined in the context of stock lying on 02.06.1998 and clearances made thereafter. The text states that where an assessee had earlier taken actual credit under Rule 57H but later reversed that credit on direction, reversal may operate in law as non-availment if the notification does not expressly prohibit such reversal. It also notes that strict construction of exemption notifications did not alter the result on these facts because the notification was not ambiguous on reversal of credit. The discussion is limited to the notification's terms and the effect of credit reversal on eligibility.

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Issues: (i) Whether the assessee was entitled to deemed credit under Notification No. 29/96-CE (N.T.), as amended by Notification No. 28/98-CE (N.T.), after reversing the actual credit earlier taken under Rule 57H of the Central Excise Rules, 1944.

Analysis: The notification covered stock lying on 02.06.1998 and permitted deemed credit on final products cleared thereafter. The assessee had earlier taken actual credit and, on being directed, reversed that credit before availing deemed credit. On the principles that reversal of credit amounts in law to non-availment of credit, the prior availment did not bar the benefit where the credit stood paid back and no express prohibition against such reversal existed in the notification. The Court also noted that the ratio of strict interpretation of exemption notifications did not assist the assessee on these facts because the notification was not ambiguous on the point of reversal of credit.

Conclusion: The assessee was not entitled to succeed on the claim for deemed credit after reversal of the earlier actual credit, and the issue was answered against the assessee.

Final Conclusion: The appeal failed and stood dismissed, leaving intact the disallowance of deemed credit.

Ratio Decidendi: Where a tax notification does not prohibit reversal of earlier availed credit, such reversal may be treated as non-availment for the purpose of claiming the benefit, but the claim must still fall strictly within the notification's terms.

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