Proforma credit for special excise duty on inputs extended where basic duty input exemption applied.

Proforma credit under Rule 56A of the Central Excise Rules was available in respect of special excise duty paid on inputs. Although the credit scheme and the relevant notification referred to basic excise duty, additional excise duty and additional duty of customs, special excise duty had to be read with the Finance Act provisions and the notification governing that levy. On that basis, the 24-5-1988 notification extended the same input-exemption benefit for basic duty to special excise duty as well, making denial of credit unsustainable.

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Issues: Whether proforma credit under Rule 56A of the Central Excise Rules was available in respect of special excise duty paid on inputs.

Analysis: The denial of credit was based on the view that Rule 56A and the relevant notification referred only to basic excise duty, additional excise duty and additional duty of customs. Special excise duty, however, is a levy imposed annually through the Finance Act, and the applicable exemption and input-relief position had to be gathered from the relevant Finance Act provisions read with the notification governing special excise duty. The notification dated 24-5-1988 made it clear that where input exemption was available in respect of basic duty, the same benefit extended to special excise duty as well.

Conclusion: Proforma credit was available for special excise duty paid on inputs, and the denial of such credit was unsustainable.

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