2005 (9) TMI 491 - AT - Central Excise

Issues:
1. Applicability of Notification No. 6/2002-C.E. (N.T.) for deemed credit.
2. Disallowance of deemed Cenvat credit on gray fabrics.
3. Interpretation of Notification No. 6/2002-C.E. (N.T.) and Rule 11 of the Cenvat Credit Rules, 2002.
4. Legality of allowing deemed credit on non-duty paid declared inputs.
5. Validity of the Commissioner of Central Excise (Appeals)'s order.
6. Interpretation of Explanation 1 to Notification 6/2002.

Analysis:

1. The issue revolved around the applicability of Notification No. 6/2002-C.E. (N.T.) for deemed credit, with the Revenue seeking to set aside the order of the CCE (A) based on the period involved in the case. The CCE (A) observed that the applicable notification for deemed credit was 6/2002-C.E. (N.T.), dated 1-3-2002, and not Notification No. 53/2001-C.E. (N.T.) as contended by the assessee.

2. The dispute arose regarding the disallowance of deemed Cenvat credit on gray fabrics received from an institute governed by NHDC, with the Adjudicating Authority contending that since the duty on yarn used in manufacturing the gray fabrics was not paid, deemed credit under Notification No. 6/2002-C.E. (N.T.) was not available. However, it was argued that the notification did not specify that cotton fabrics for deemed credit must be manufactured from duty-paid yarn.

3. The interpretation of Notification No. 6/2002-C.E. (N.T.) and Rule 11 of the Cenvat Credit Rules, 2002 was crucial. The Tribunal analyzed the legislative intent behind deemed credit provisions, emphasizing that deemed credit should be allowed irrespective of the actual duty paid on inputs, as clarified in Explanation 1 to the notification.

4. The legality of allowing deemed credit on non-duty paid declared inputs was questioned, with the Commissioner of Central Excise (Appeals) being criticized for not considering the facts and legislative intent before allowing such credits. The Tribunal highlighted the necessity of the duty-paid nature of declared inputs for availing deemed credit.

5. The validity of the Commissioner of Central Excise (Appeals)'s order was upheld based on the absence of valid grounds in the appeal to overturn the decision. The Tribunal found no bar in Notification 6/2002 to grant eligibility for deemed credit on gray fabrics received in the case.

6. The interpretation of Explanation 1 to Notification 6/2002 played a significant role in the judgment. The Tribunal analyzed the plain reading of the Explanation, emphasizing that deemed credit rates specified in the notification should be eligible regardless of the actual duty paid on inputs. The Tribunal rejected the Revenue's interpretation, supporting the assessee's case.

In conclusion, the Tribunal rejected the Revenue's appeal based on the findings related to the interpretation of the notifications, legislative intent, and the eligibility of deemed credit on non-duty paid inputs, ultimately upholding the Commissioner of Central Excise (Appeals)'s order.

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