2005 (10) TMI 471 - AT - Central Excise

Summary

Issues:
1. Availment of credit on semi-processed fabrics
2. Interpretation of Rule 57A regarding duty payment for credit
3. Clarification on deemed credit scheme for inputs

Analysis:

1. The appellant, an independent fabric processor, received grey fabrics and semi-processed fabrics. They availed deemed Modvat credit for duty exemption on processed fabrics from grey fabrics. However, a dispute arose regarding the credit on duty paid for semi-processed fabrics. The Revenue contended that since duty was paid partly from PLA and partly from deemed credit, the appellant was not entitled to the credit. A show cause notice was issued for excess credit availed, leading to the present appeal.

2. Rule 57A allows the manufacturer of the final product to avail Modvat credit on duty paid inputs, without specifying that duty should only be paid from PLA for credit eligibility. The confusion stemmed from the deemed credit notification's restriction on semi-processed inputs. The appellant claimed credit for actual duty paid on semi-processed fabrics, regardless of the first processor's use of deemed credit. The Tribunal clarified that duty paid from a credit account is also eligible for credit, rejecting the Revenue's argument against the appellant's credit claim.

3. The Tribunal referenced a Board circular stating that credit for actual duty paid on partially processed fabrics is permissible. The lower authorities misinterpreted "actual duty paid" as duty paid solely from PLA. The Tribunal emphasized that the use of deemed credit by the input manufacturer to pay duty renders the goods duty-paid, making the duty credit available to the receiver. Therefore, there was no justification to restrict credit eligibility to duty paid only from PLA. Consequently, the impugned orders were set aside, and the appeal was allowed with consequential relief.