Countervailing duty credit under Rule 56A was denied where Tariff Item 68 inputs fell within the amended exclusion and procedure was mandatory

Rule 56A credit was available only subject to the conditions imposed by the rule-making authority, and the second proviso inserted by Notification No. 104/79 expressly excluded countervailing duty credit where the material or component parts fell under Tariff Item No. 68. Read with Notification No. 109/80, which made compliance with Rule 56A mandatory for availing Notification No. 103/61, entitlement to credit depended on strict satisfaction of the prescribed procedure and conditions. The contention that the proviso was merely substantive and severable from the Rule 56A scheme was rejected, and credit of countervailing duty on the imported intermediates was not available.

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Issues: Whether credit of countervailing duty under Notification No. 103/61 could be claimed in respect of imported intermediates falling under Tariff Item No. 68 after the insertion of the second proviso to Rule 56A(2) by Notification No. 104/79, and after Notification No. 109/80 made compliance with Rule 56A mandatory.

Analysis: Rule 56A was intended to grant relief against double incidence of duty in specified cases, but the availability of that relief was subject to the conditions imposed by the rule-making authority. The second proviso inserted by Notification No. 104/79 expressly denied credit of countervailing duty where the material or component parts fell under Tariff Item No. 68 of the First Schedule to the Central Excise and Salt Act, 1944. Read together with the amendment made by Notification No. 109/80, which required the procedure under Rule 56A to be followed for availing the exemption under Notification No. 103/61, the entitlement to credit depended on fulfilment of the stipulated conditions. The petitioner's argument that the proviso was merely substantive and severable from the scheme of Rule 56A was rejected.

Conclusion: The petitioner was not entitled to the credit of countervailing duty claimed under Notification No. 103/61 for imported intermediates falling under Tariff Item No. 68, and the impugned departmental communications were valid.

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