Proforma credit under excise exemption notification was unavailable for inputs used in fully exempt tyres, tubes and flaps.

Notification No. 95/79-C.E. allowed proforma credit only to the extent of duty already paid on specified inputs and subject to the conditions in the notification and Rule 56A procedure. For the period 1 March 1982 to 28 February 1983, the amending notification covered synthetic rubber, carbon black, rubber processing chemicals, and tyres, tubes and flaps, but the second proviso limited the set-off where the duty on the final product was lower than the duty on inputs. On that basis, proforma credit was not available for inputs used in fully exempt tyres, tubes and flaps cleared to original equipment manufacturers, and the later deletion of the proviso from 1 March 1983 did not affect the disputed period.

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Issues: Whether proforma credit under Notification No. 95/79-C.E., as amended, was available on inputs used in the manufacture of tyres, tubes and flaps cleared to original equipment manufacturers during the relevant period when the final products were fully exempt from central excise duty.

Analysis: Notification No. 95/79-C.E. granted exemption to specified final products to the extent of duty already paid on specified inputs, subject to the conditions in its provisos and the procedure under Rule 56A of the Central Excise Rules, 1944. The amending Notification No. 58/82-C.E. inserted synthetic rubber, carbon black and rubber processing chemicals, and tyres, tubes and flaps, into the table only for the period 1-3-1982 to 28-2-1983. During that period, the second proviso to Notification No. 95/79-C.E. restricted the exemption where the duty on the final product was less than the duty paid on inputs, and the Tribunal held that set-off was not available for inputs used in the manufacture of fully exempt final products supplied to original equipment manufacturers. The deletion of the proviso by Notification No. 95/83-C.E. from 1-3-1983 did not affect the period in dispute.

Conclusion: The proforma credit was not available for the relevant clearances, and the contention of the assessee failed.

Ratio Decidendi: Where an exemption notification links input credit to the duty payable on the final product, proforma credit cannot be availed for inputs used in manufacturing final products that are fully exempt from duty during the relevant period.

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