Input duty credit under Notification No. 5/94 follows duty actually paid, not notional duty under correct classification.

Notification No. 5/94 was read as allowing credit of the duty actually paid on inputs, not merely the duty that should have been payable under the correct tariff classification. Where inputs were assessed and duty was paid at a higher amount because of a wrong classification, the notification did not permit reversal of the differential credit on the ground of notional excess duty. The credit was therefore not subject to restriction by reference to the lawful incidence of duty, and the order denying full credit was unsustainable.

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Issues: Whether credit under Notification No. 5/94 could be restricted to the duty that was legally payable, or whether credit was admissible of the duty actually paid on inputs.

Analysis: Notification No. 5/94 permits credit of the specified duty paid on inputs. On a plain reading, the expression does not support limiting credit only to the amount that ought to have been payable under the tariff heading correctly applicable. Where duty has in fact been paid at a higher amount because of a wrong assessment, the notification does not authorise reversal of the differential credit merely on the footing that the amount paid exceeded the lawful incidence of duty. The impugned order was therefore unsustainable.

Conclusion: The credit could not be restricted to the duty notionally payable under the correct classification; the assessee was entitled to credit of the duty actually paid.

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