2008 (4) TMI 586 - AT - Central Excise

Refund claim - Deemed Credit, lying unutilized, taken on the inputs used in the manufacture of goods exported under Bond

Summary

Issues:
1. Refund claim for Deemed Credit on inputs used in the manufacture of exported goods.
2. Eligibility of grey fabrics for Deemed Credit.
3. Interpretation of Notification No. 6/2002-(C.E.) (N.T.) under Rule 11 of Cenvat Credit Rules, 2002.
4. Precedent set by the Tribunal in Damini Printers (P) Ltd. v. C.C.E., Noida regarding grey fabrics as inputs for deemed credit.

Issue 1: Refund claim for Deemed Credit on inputs used in the manufacture of exported goods.

The Respondents, engaged in manufacturing Man-made fabrics and exporting them, filed a refund claim for Deemed Credit on inputs used in the manufacture of goods exported under Bond. The Dy. Commissioner approved the refund claim. Subsequently, the Revenue appealed before the Commissioner (Appeals), who rejected the appeal. The Commissioner (Appeals) noted that grey fabrics were exempt from Central Excise Duty, making the manufacturer unable to avail actual cenvat credit on the yarn used in manufacturing grey fabrics, leading to the incorporation of deemed credit provisions in the Rules.

Issue 2: Eligibility of grey fabrics for Deemed Credit.

The Revenue contended that grey fabrics, exempted from duty and a primary input for processed fabrics, were not declared as eligible inputs for credit in any Notification. However, the Commissioner (Appeals) found that the respondents correctly availed deemed credit on duty paid on yarn, dyes, chemicals, and packing material, as the yarn, although not directly used in the final products, was contained in the grey fabric used in processing, satisfying the conditions of Rule 57A(2) and Rule 11 of Cenvat Credit Rules, 2002.

Issue 3: Interpretation of Notification No. 6/2002-(C.E.) (N.T.) under Rule 11 of Cenvat Credit Rules, 2002.

The Tribunal referred to the decision in Damini Printers (P) Ltd. v. C.C.E., Noida, where it was held that grey fabrics brought into the factory for processing were not declared as inputs for deemed credit under Notification No. 6/2002-(C.E.) (N.T.). However, deemed credit would be available if the declared inputs were contained in the final products, without the necessity of direct use by the manufacturer of final products. This interpretation guided the Tribunal's decision not to interfere with the Commissioner (Appeals)'s order, leading to the rejection of the Revenue's appeal.

Issue 4: Precedent set by the Tribunal in Damini Printers (P) Ltd. v. C.C.E., Noida regarding grey fabrics as inputs for deemed credit.

The Tribunal's decision in Damini Printers (P) Ltd. v. C.C.E., Noida established that grey fabrics brought in for processing were not initially declared as inputs for deemed credit. However, the presence of declared inputs in the final products sufficed for the availability of deemed credit, without the requirement of direct use by the manufacturer of final products. This precedent influenced the Tribunal's decision to uphold the Commissioner (Appeals)'s order and reject the Revenue's appeal.

This comprehensive analysis of the judgment highlights the issues surrounding the refund claim for Deemed Credit, the eligibility of grey fabrics, the interpretation of relevant Notifications and Rules, and the legal precedent set by the Tribunal in a similar case.