2019 (3) TMI 1426 - HC - Central Excise

Tribunal confirms deemed credit eligibility, allowing flexibility in post-clearance credit claim

The Tribunal upheld the decision to regularize deemed credit for the respondent, as the reversal of actual credit satisfied the condition of not availing ... Deemed credit - Interpretation of statute - N/N. 29/96-CE (N.T.), dated 03.09.1996 as amended by N/N. 28/98-CE (NT), dated 18.07.1998 - benefit of deemed credit of duty paid on the inputs used for manufacture of final products - manufacture of various kinds of fabrics - Held that:- In Hello Minerals Water (P) Ltd. [2004 (7) TMI 98 - ALLAHABAD HIGH COURT] referred to in Precot Meridian Ltd [2015 (11) TMI 323 - SUPREME COURT], the facts were that certain final products of Chapter 39 of the Schedule to the Central Excise Tariff Act were fully exempted from Central Excise Duty under Notification No.15/94-C.E., dated 01/03/1994. The condition for exemption was that no MODVAT Credit should be availed on the inputs used in manufacturing of these final products. The assessee had availed the credit on the inputs but reversed subsequently. The issue was whether reversal of credit after availment can satisfy the condition of nonavailment of credit under the exemption notification. When these findings are tested on the anvil of the law laid down in Hello Minerals Water (P) Ltd. and Precot Meridian Ltd, we are of the considered opinon that the Tribunal is well within its jursidction in regularizing the deemed credit under Notification No.29/96-CE (N.T.), dated 03.09.1996 as amended by Notification No.28/98-CE (NT), dated 18.07.1998 as the benefit taken by the assessee under Rule 57H was paid back, i.e.: reversed. In the factual aspect of present case where there is no prohibition in the Notification No.29/96-CE (N.T.), dated 03.09.1996 as amended by Notification No.28/98-CE (NT), dated 18.07.1998 from reversing the Credit availed on the input to avail the benefit under said Notification No.29/96-CE (N.T.), dated 03.09.1996 as amended by Notification No.28/98-CE (NT), dated 18.07.1998 and the law laid down Hello Minerals Water (P) Ltd. and Precot Meridian Ltd, we are of the considered opinion that the appellants are not benefitted by the law laid down in Dilip Kumar and Company and others [2018 (7) TMI 1826 - SUPREME COURT OF INDIA], where it was held that When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. Appeal dismissed - decided against Revenue. Issues Involved:1. Interpretation of Notification No.29/96-CE (N.T.), dated 03.09.1996 as amended by Notification No.28/98-CE (NT), dated 18.07.1998.2. Eligibility for deemed credit on inputs used for manufacturing final products.3. Compliance with conditions for availing deemed credit.4. Reversal of actual credit and its impact on deemed credit eligibility.5. Interpretation of 'at the time of clearance' in the context of deemed credit.Issue-wise Detailed Analysis:1. Interpretation of Notification No.29/96-CE (N.T.), dated 03.09.1996 as amended by Notification No.28/98-CE (NT), dated 18.07.1998:The core issue is the interpretation of the notification which allows deemed credit for inputs used in manufacturing final products. The notification specifies that deemed credit is allowed at 50% or 60% of the duty of excise, depending on the type of fabric, at the time of clearance of final products lying in stock as of 02.06.1998. The proviso restricts the credit if the processing factory has taken credit under any other rule or notification.2. Eligibility for Deemed Credit on Inputs Used for Manufacturing Final Products:The respondent availed deemed credit of Rs. 1,57,11,626/- and Rs. 21,417/- for man-made and cotton fabrics respectively, lying in stock on 02.06.1998, and processed and cleared from 02.06.1998 to 20.08.1998. The eligibility was questioned through show-cause notices alleging wrongful availing of deemed credit on fabrics already cleared with duty payment through PLA or MODVAT accounts.3. Compliance with Conditions for Availing Deemed Credit:The Assistant Commissioner initially dropped the show-cause notices, stating that the respondent had paid back the actual credit taken and availed deemed credit, which was less than the actual credit. The Commissioner, however, reversed this decision, stating that the respondent did not fulfill the conditions of taking deemed credit only at the time of clearance and using it only for payment of duty on declared final products.4. Reversal of Actual Credit and Its Impact on Deemed Credit Eligibility:The Tribunal, relying on precedents like 'Chandrapur Magnet Wires (P) Ltd.' and 'Bombay Dyeing & MFG Co. Ltd.,' held that reversal of actual credit placed the respondent in a position equivalent to not availing the credit, thereby satisfying the conditions of the notification. The Tribunal emphasized that the credit would be available with reference to stock on the stipulated date and utilized for payment of duty on goods cleared later.5. Interpretation of 'At the Time of Clearance' in the Context of Deemed Credit:The Assistant Commissioner and the Tribunal interpreted 'at the time of clearance' liberally, allowing deemed credit to be taken after the clearance of goods, provided it was taken subsequent to the clearance. The Tribunal found that the phrase should not be taken too literally, and the credit could be taken after the clearance of goods, aligning with the stock on the stipulated date.Conclusion:The Tribunal's decision to set aside the Commissioner's order and regularize the deemed credit was upheld, relying on the principle that reversal of actual credit satisfies the condition of not taking credit under any other rule or notification. The appeal by the department was dismissed, affirming that the respondent complied with the notification's conditions and was eligible for deemed credit. The interpretation of 'at the time of clearance' was not taken literally, allowing flexibility in availing deemed credit post-clearance.