2009 (2) TMI 476 - HC - Central Excise

Cenvat credit - unprocessed stock of fabrics held by a dealer is input in terms of Notification No. 35/2003-C.E - Held that - processor had purchased directly from the manufacturer of grey fabrics, the grey fabrics purchased will be undoubtedly and undisputedly an inputs in the hands of the processor - . Merely because a dealer has been introduced in between the manufacturer of inputs and the manufacturer of finished goods, the nature of these products as input cannot undergo a change - credit not merely for stock with the traders but also in respect of stock lying with the processors - Appeals is dismissed

Summary

Issues:
1. Whether grey fabrics held by a dealer constitute 'input' under Notification No. 35/2003-C.E. (N.T.)?
2. Whether transitional credit can be allowed to the dealer without filing a declaration of stock as on 1-4-2003 under Rule 9(A) of the CENVAT Credit Rules, 2002?

Issue 1: Grey Fabrics as 'Input' under Notification No. 35/2003-C.E. (N.T.):
The Tribunal considered whether grey fabrics held by a dealer qualify as 'input' under the mentioned notification. It was observed that grey fabrics are considered finished products for the manufacturer and inputs for further processors. The Tribunal highlighted that the involvement of a dealer between the manufacturer of inputs and finished goods does not change the nature of the products as inputs. The notification allows credit for stock with traders and processors, indicating that grey fabrics can be classified as inputs regardless of the presence of a dealer.

Issue 2: Transitional Credit and Declaration Requirement:
The second issue raised was whether transitional credit could be granted to the dealer without submitting a stock declaration as of 1-4-2003 under Rule 9(A) of the CENVAT Credit Rules, 2002. The Tribunal did not find merit in this argument, emphasizing that the grey fabrics qualify as inputs irrespective of the dealer's involvement. Consequently, the appeals were dismissed, affirming the Tribunal's decision.

In conclusion, the High Court upheld the Tribunal's decision regarding the classification of grey fabrics as inputs under Notification No. 35/2003-C.E. (N.T.) and the eligibility of transitional credit for the dealer without the need for a stock declaration. The appeals were dismissed, affirming the Tribunal's findings on both issues.