Proforma credit under Notification No. 95/79-C.E.: direct input-output nexus not required, though one view limited credit to duty-paid clearances.

Notification No. 95/79-C.E. was read as requiring only compliance with the procedure under Rule 56A of the Central Excise Rules, not the full set of Rule 56A conditions. On that reading, the notification did not impose an express requirement of a direct nexus between inputs and outputs or limit proforma credit to duty-paid clearances of the final products. The stated effect was that the assessee could claim proforma credit on the duty paid on corresponding inputs. A dissent took the view that proviso 2 confined the exemption to duty leviable on the final product, so credit was unavailable where the final product was cleared without payment of duty.

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Issues: Whether Notification No. 95/79-C.E. required a direct nexus between inputs and outputs, and whether proforma credit was unavailable merely because the final products were cleared without payment of duty.

Analysis: The opening proviso to Notification No. 95/79-C.E. required only that the procedure under Rule 56A of the Central Excise Rules be followed. It did not incorporate all conditions of Rule 56A, and it contained no express stipulation that the inputs must be linked only to duty-paid clearances. On a plain reading, the notification exempted the specified final products to the extent of duty paid on the corresponding inputs, subject to the stated provisos. Since no condition of direct nexus or duty payment on the final products was found in the text of the notification, such a requirement could not be added by interpretation.

Conclusion: The notification did not require a direct nexus between inputs and outputs, and the assessee was entitled to the benefit of proforma credit.

Dissenting Opinion: V.P. Gulati, Member (T), held that proviso 2 restricted the exemption to the duty leviable on the final product, so where the final product was cleared without payment of duty, the available credit was nil. On that view, the credit claimed on inputs used in such clearances was not admissible and the appeal was liable to be disallowed.

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