2007 (3) TMI 54 - AT - Central Excise

Cenvat/modvat Appellant contended that the second receipt from job worker after partly processing fabrics for further full processing can t be interpreted as receipt of processed fabrics so as to deny the benefit of Notification No. 29/96-CE (NT) Tribunal allowed the appeal with consequential relief

Summary

Issues:
1. Entitlement to deemed Modvat credit for processors of fabrics on job work basis under Notification No. 29/96-CE (NT).
2. Interpretation of Explanation II to Clause (7) of the notification regarding the use of processed fabrics as an input for further processing.

Analysis:
1. The issue in the present appeal revolves around whether the appellant, a processor of fabrics on a job work basis, is eligible for the benefit of deemed Modvat credit as per Notification No. 29/96-CE (NT). The appellant receives grey fabrics from the principal manufacturer for processing, carrying out the necessary procedures in their factory except for the singeing process, which is outsourced to another job worker. The appellant then receives the semi-processed fabrics back, completes the remaining processing, and returns the goods to the supplier of grey fabrics. The question is whether the appellant is entitled to claim Modvat credit for the duties paid during the processing.

2. The denial of deemed credit is based on Explanation II to Clause (7) of the notification, which states that the notification does not apply when processed fabrics are used as inputs for further processing. The revenue argues that since the appellant sends semi-processed fabrics to a second job worker and receives processed fabrics in return, they are effectively using processed fabrics as inputs for further processing, thus disqualifying them from the notification's benefits. However, a precedent set by the Tribunal in a similar case (Commissioner of Central Excise, Ahmedabad v. Balkrishna Textile Pvt. Ltd.) ruled that receiving semi-processed fabrics from a job worker after partial processing does not constitute receiving processed fabrics, thereby upholding the appellant's right to the notification's benefits.

3. The Tribunal concurred with the precedent's reasoning, emphasizing that the appellant's actions do not amount to using processed fabrics as inputs for further processing. Therefore, the explanation in the notification should not be interpreted to the detriment of the appellant, who initially receives grey fabrics and ultimately clears processed fabrics. Consequently, the Tribunal set aside the earlier order and granted the appeal, providing consequential relief to the appellant.