Proforma credit under tariff rules can survive different classification where remission is sanctioned by notification and procedural compliance is substantial.

Rule 56A permitted proforma credit even where inputs and finished goods fell under different tariff items if the Central Government had sanctioned remission or adjustment by notification. On that basis, the exemption notification brought the case within the permissive part of the rule, so differential tariff classification alone could not defeat the credit. The procedural objection also failed because the record showed application for permission, maintenance of registers and returns, and substantial compliance with the notification requirements, including input-output particulars for most materials. The credit demand was therefore unsustainable, subject to due verification of entitlement under the notification.

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Issues: (i) whether proforma credit was admissible where the inputs and finished goods fell under different tariff items but the Central Government had sanctioned exemption or remission by notification; and (ii) whether the appellants had complied with the notification and procedural requirements for availing the credit, including the furnishing of input-output particulars.

Issue (i): whether proforma credit was admissible where the inputs and finished goods fell under different tariff items but the Central Government had sanctioned exemption or remission by notification;

Analysis: Rule 56A disallowed proforma credit in the ordinary course where inputs and finished goods were assessable under different tariff items, but clause (b) of sub-rule (2)(ii) permitted it where the Central Government had specifically sanctioned remission or adjustment of duty on the inputs. The notification in question granted such exemption, and the case therefore fell within the permissive part of the rule.

Conclusion: Proforma credit was admissible and the objection based only on different tariff classification was unsustainable.

Issue (ii): whether the appellants had complied with the notification and procedural requirements for availing the credit, including the furnishing of input-output particulars.

Analysis: The record showed that the appellants had applied for permission to use the procedure, had commenced availing credit pending final approval, and had maintained the relevant registers and returns. The notification requirement regarding particulars of inputs used was not shown to have been breached in a manner justifying denial of the benefit, especially when the appellants had furnished input-output ratios for most materials and were ready to furnish the remaining details.

Conclusion: The procedural objections did not justify denial of the benefit of the notification.

Final Conclusion: The credit demand was unsustainable, the impugned orders were set aside, and the appellants were entitled to the benefit of the exemption notification after due verification.

Ratio Decidendi: Where the statutory rule expressly permits proforma credit despite different tariff classification because the Government has sanctioned remission or adjustment by notification, the benefit cannot be denied on that ground alone, and procedural requirements must be applied in a manner consistent with the notification and the rule.

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