2006 (12) TMI 330 - AT - Central Excise

Summary

Issues involved: Interpretation of the term "input" under Cenvat Credit Rules, 2002 in the context of grey fabrics and eligibility for credit under Notification No. 35/03.

Summary:
The case involved an appeal against the order of the Commissioner (Appeals) dated 29-6-2005 concerning the eligibility of Cenvat credit on grey fabrics under the Cenvat scheme introduced on 1-4-2003. The dispute centered around whether man-made grey fabrics could be considered as inputs for the purpose of availing credit. The department argued that grey fabrics were not inputs as they were not used by the dealer to manufacture goods. The term "input" was defined under Rule 2(g) of the Cenvat Credit Rules, 2002. The appellants contended that grey fabrics should be treated as inputs under Notification No. 35/03, which allowed credit on inputs or inputs contained in finished goods. The Tribunal noted that the term "input" is relative, and what is a finished product for one party may be an input for another. In this case, grey fabrics were considered finished products for manufacturers but inputs for processors. The presence of a dealer in the supply chain did not change the nature of the products as inputs. The Tribunal upheld the appellants' argument, emphasizing that the Cenvat scheme aimed to provide credit for both traders and processors. Consequently, the appeals were allowed, and the decision was pronounced on 29-12-2006.