2008 (7) TMI 695 - AT - Central Excise

Summary

Issues:
- Benefit of Notification No. 29/96-C.E. (N.T.)
- Eligibility for deemed credit on processed fabrics
- Interpretation of Explanation II of the Notification
- Applicability of Trade Notice No. 90/96
- Legal position on input credit for processed fabrics

Benefit of Notification No. 29/96-C.E. (N.T.):
The appeal was filed against the Order-in-Appeal denying the appellants the benefit of Notification No. 29/96-C.E. (N.T.). The original authority had demanded an amount equal to the deemed credit taken and utilized, along with imposing a penalty. The Commissioner (Appeals) upheld the denial based on the Explanation II of the Notification, stating that the provisions did not apply when processed fabric was used as an input for further processing.

Eligibility for deemed credit on processed fabrics:
The appellants relied on a Tribunal decision in a similar case where deemed credit was allowed for processing grey fabrics. The Tribunal observed that credit of duty paid on partially processed fabrics would be available under Rule 57A(1). The Trade Notice clarified that manufacturers receiving partially processed fabrics and clearing them after final processing would be eligible for credit of duty paid on such fabrics. This position was supported by the Tribunal decision and the Trade Notice.

Interpretation of Explanation II of the Notification:
The SDR argued that processed fabrics manufactured from partially processed fabrics were not eligible for deemed credit based on Explanation II of the Notification. The explanation clarified that the provisions did not apply when processed fabrics were used as inputs for further processing. However, the appellant's contention was that the Trade Notice and legal position allowed for deemed credit on processed fabrics cleared using partially processed fabrics as inputs.

Applicability of Trade Notice No. 90/96:
The Trade Notice issued at the time of introducing Notification No. 29/96-C.E. clarified that manufacturers could avail input credit on partially processed fabrics cleared after final processing. This notice was crucial in determining the eligibility for deemed credit on processed fabrics. The appellant's argument was supported by the Trade Notice and legal interpretations.

Legal position on input credit for processed fabrics:
After considering the submissions and case records, it was concluded that manufacturers using partially processed fabrics as inputs to clear processed fabrics were eligible for input credit on the partially processed fabrics and deemed credit on the processed fabrics. The legal position, as per the statute and Trade Notice, supported the appellant's claim for deemed credit. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellant.