Deemed credit under exemption notifications cannot be denied merely because a monetary clearance cap was crossed.

Rerollers were held entitled to deemed credit under the 01.03.1994 notification where the exemption scheme they otherwise satisfied contained a Rs. 75 lakh clearance ceiling. The monetary cap was treated as limiting the extent of exemption, not as creating a separate disqualification from deemed credit. The contrary Tribunal view, which treated crossing that limit as destroying eligibility altogether, was held to be an incorrect reading of both the exemption notification and the deemed credit order. The operative principle is that a benefit tied to an exemption notification cannot be denied on the basis of a cap unless the deeming order expressly makes that cap an eligibility bar.

---

---

Issues: Whether rerollers whose aggregate value of clearances exceeded Rs. 75,00,000 in a financial year could be denied deemed credit under Notification No. TS/36/94-TRU dated 01.03.1994 on the ground that they were not availing exemption under Notification No. 1/93-C.E. dated 28.02.1993.

Analysis: The deemed credit order issued under the second proviso to Rule 57G(2) of the Central Excise Rules, 1944 granted credit to rerollers availing exemption under Notification No. 1/93-C.E. The Court distinguished between the eligibility to avail the exemption notification and the quantum limit governing the extent of benefit under that notification. The Rs. 75 lakh ceiling was held to regulate the extent of exemption and not to create a disqualification for rerollers who otherwise satisfied the conditions of the notification. The Tribunal's contrary view, based on the notion that crossing the Rs. 75 lakh limit destroyed eligibility for deemed credit, was held to be an incorrect interpretation of both the notification and the deemed credit order.

Conclusion: The assessee remained entitled to deemed credit notwithstanding crossing the Rs. 75,00,000 clearance limit, and the adverse Tribunal orders were unsustainable.

Ratio Decidendi: Where a deemed credit order extends benefit to manufacturers availing an exemption notification, a monetary cap within that exemption governs only the extent of benefit and does not, by itself, negate eligibility for deemed credit unless the order expressly so provides.

---