2007 (3) TMI 455 - AT - Central Excise

Summary

Issues Involved:
Whether the appellant, a processor of fabrics on a job work basis, is entitled to the benefit of deemed Modvat credit under Notification No. 29/96-CE (NT) for dyes, chemicals, and consumables used in manufacturing processed fabrics.

Analysis:

1. The primary issue in the appeal was whether the appellant, engaged in processing fabrics on a job work basis, could avail the benefit of deemed Modvat credit as per Notification No. 29/96-CE (NT). The notification allows credit for inputs like dyes, chemicals, and consumables used in processing fabrics. The appellant received grey fabrics from the principal manufacturer for processing, sending semi-processed fabrics to another job worker for certain processes. The Revenue contended that the appellant was using processed fabrics as input for further processing, hence not eligible for the notification's benefit.

2. The denial of deemed credit was based on Explanation II to Clause (7) of the notification, which states that the notification does not apply if processed fabrics are used as input for further processing. However, a precedent cited by the Tribunal in a similar case held that receiving semi-processed fabrics from a job worker after partial processing does not equate to receiving processed fabrics, thereby allowing the benefit of the notification. The Tribunal agreed with this interpretation, emphasizing that the appellant, who initially received grey fabrics, should not be disadvantaged due to intermediary processing steps.

3. The Tribunal's decision was influenced by a previous ruling in Commissioner of Central Excise, Ahmedabad v. Balkrishna Textile Pvt. Ltd., which clarified that receiving semi-processed fabrics for further processing did not disqualify the appellant from the notification's benefits. The Tribunal concurred with this reasoning, overturning the previous order and granting the appeal in favor of the appellant. The judgment highlighted that the mere involvement of an intermediary job worker for intermediate processing should not negate the appellant's entitlement to the deemed Modvat credit under the notification.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the benefit of deemed Modvat credit under Notification No. 29/96-CE (NT) for the processing of fabrics on a job work basis, emphasizing that the appellant's receipt of semi-processed fabrics did not disqualify them from the notification's provisions.