S. Venkatesan, President

1. The question raised in this appeal is whether the Assistant Collector was right in demanding the amount of Rs. 72,825/- of which proforma credit was taken by the respondents under Rule 56A, and subsequently utilised by them against payment and duty on the computers manufactured by them. They situation was created by the fact that on 17-03-1985 Government issued Notification No. 67/85 excepting computers from duty. Consequently, the benefit of Rule 56A became inapplicable to component parts to be used in the manufacture

2. The case of the respondents is that the issue of the notification was subsequent to their taking proforma credit for the component parts, and subsequent also to their utilizing the credit for the clearance of computers manufactured by them. According to them, the credit which was lawful at the time it was taken and the utilization of the credit which was lawful at the time of utilization should not be affected because subsequently computers were exempted from duty. The case of the Revenue is that in terms of Rule 56A(2) and in the light of the exemption notification , they were not entitled to the credit and, therefore, they should pay it back.

3. Appearing before us for the appellant Collector, Shri Bhatia referred to the basic facts. He laid stress on Sub-rule (2) of Rule 56A. The proviso to this Sub-rule states that no credit of duty shall be allowed if the finished excisable goods are exempt from the whole of the duty of excise leviable. In this case the computers were so exempted, and therefore the proviso would come into operation.

4. Apart from this, Sub-rule (3), Clause (v) also laid down that if any material or component parts, in respect of which credit had been allowed, were not duly accounted for as having been disposed of in the manner authorised in the rule , the manufacturer should pay the duty leviable, on demand by the proper officer. This clause would also apply o the present case.

5. Further, Clause (vi)(a) and (b) of Sub-rule (3) made it clear that the credit of duty allowed under Rule 56A could be utilised only in the manner prescribed in Sub-rule (2).

6. The respondents had placed reliance on a trade notice No. 222/79, issued by the Ahmedabad Central Excise Collectorate. With reference to point No. (5), it had been stated that "requirement of strict input/output co-relation has been dispensed with." This did not, however, mean that no correlation was required. There should be a broad correlation between the inputs and the outputs. It need not be a piece-to-piece correlation, but it had to be a proportionate correlation. It had even been laid down that wastage had to be properly accounted for. There could therefore be no doubt that the main product, that is, the input had to be properly accounted for.

7. Even assuming that the trade notice, which was said to be based on instructions of the CBEC, could bear the meaning claimed by the respondents, executive instructions could not enlarge or restrict the scope of a statutory provision. Further, the Board's clarification had reference to Notification No. 9.5/79, which inter alia made the procedure under Rule .56A applicable. The clarification was not with reference to Rule 56A as such.

8. In the show-cause notice, Sub-rule (5) of Rule 56A had been invoked. No doubt this sub-rule, which referred to credit being wrongly- allowed on account of error, omission or misconstruction, was not applicable to the present case. However, Sub-rule (3)(v), read with Sub-rule (2), would be applicable. No time limit was applicable for demanding duty in terms of these provisions. For these reasons Shri Bhatia submitted that . the appeal should be allowed.

9. For the respondents, Shri Khunger submitted that there were two separate provisions, one for allowing the credit and another for utilizing the credit. As regards allowing the credit, specific provisions had been made in Sub-rule (2) for the Collector to allow the credit subject to ce