2002 (12) TMI 515 - AT - Central Excise

Summary

Issues:
Whether the appellant is entitled to benefit of deemed credit.

Analysis:
The appellants were engaged in the manufacture of coated fabrics and started processing operations on woven fabrics on a job work basis in December 1997. They began manufacturing knitted fabric in June 1998, which was coated to make the final product. The capacity of the appellants was provisionally fixed by the Commissioner under Section 3A of the Central Excise Act. Subsequently, the appellants informed the department that they should be classified under Section 3 instead of Section 3A. They paid a differential duty amount and claimed deemed credit under Notification No. 29/96-C.E. However, a show cause notice was issued proposing to deny deemed credit, alleging suppression of vital facts to evade duty. The department argued that the appellants suppressed the fact of knitting fabrics in their factory. The Commissioner confirmed the duty demand based on this allegation.

The appellant contended that there was no suppression on their part. They had informed the department in a letter that they were not independent processors of textile fabric and requested not to be treated as such. Despite this, the department registered them under Section 3A. The appellants were later permitted to come under Section 3 in July 1999. They argued that the knitted fabric was captively consumed in the manufacture of coated fabrics and was wholly exempt under Notification No. 5/98. The appellants maintained that they had not shown fabrics in their returns due to this reason.

The Tribunal found merit in the appellant's contentions. Considering the facts of the case, it was concluded that the appellants were not guilty of suppression. Therefore, they were not liable to be denied the deemed credit. The order impugned was set aside, and the appeal was allowed.