2006 (12) TMI 433 - AT - Central Excise

Summary

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

Summary:
The appeal was filed against the order of the Commissioner (Appeals) dated 17-6-2005. The appellant, a registered dealer dealing with grey fabrics, sought Cenvat credit under Notification No. 35/03 dated 10th April 2003. The dispute arose as the department contended that man-made grey fabrics were not eligible as inputs for Cenvat credit. The department argued that the grey fabrics did not qualify as inputs under Rule 2(g) of the Cenvat Credit Rules, 2002.

The appellant argued that the term 'input' should be understood in the context of the next user and the credit available. They contended that grey fabrics should be considered as inputs, not finished goods, for the purpose of Cenvat credit. The Tribunal noted that the status of a product as an input or finished product is relative. While grey fabrics are a finished product for the manufacturer, they are inputs for processors. The Tribunal emphasized that the presence of a dealer in the supply chain does not change the nature of the products as inputs.

The Tribunal accepted the appellant's argument, ruling that grey fabrics qualify as inputs for Cenvat credit under Notification No. 35/03. The decision highlighted that the notification allows credit for stock with traders and processors. The appeal was allowed in favor of the appellant.

*(Dictated & pronounced in the Open Court.)*