2010 (9) TMI 309 - AT - Central Excise

Cenvat credit deemed credit - whether the goods were to be treated as inputs or finished goods - finished goods of the appellants was processed fabrics - declaration filed by them and credit taken by them was in order - no provision in the notification to subsequently require the appellant to reverse the credit taken for the inputs which are cleared as such - Once the credit has been taken correctly to demand reversal of such credit there has to be a valid ground - clearances of inputs as such credit taken initially is proposed to be denied lacks any legal support Appeal allowed

Summary

Issues:
1. Availment of cenvat credit on grey fabrics.
2. Interpretation of Notification No. 35/2003-C.E. (N.T.).
3. Denial of credit by lower authorities.
4. Validity of demanding reversal of credit.

Analysis:
1. The appellant, engaged in processing fabrics, availed cenvat credit on grey fabrics under Central Excise Tariff Act, 1985. Dispute arose as lower authorities viewed grey fabrics cleared without processing as finished goods, denying credit under Notification No. 35/2003-C.E. (N.T.). Appellant argued grey fabrics were received as inputs and clearance as such should not affect credit eligibility.

2. Notification No. 35/2003-C.E. (N.T.) governs credit on inputs in stock or finished goods. Serial No. 2(b) applies to unprocessed fabrics in finished goods. Appellant's processed fabrics qualify as finished goods, entitling credit under serial No. 1(c). The notification doesn't mandate reversal of credit for cleared inputs, requiring a distinction between inputs and finished goods.

3. The advocate contended that denial of credit based on clearances of grey fabrics was unjustified, emphasizing the appellant's manufacturing status and correct credit availing process. The Departmental Representative supported lower authorities' stance that grey fabrics cleared as such couldn't be considered inputs.

4. The Tribunal noted the appellant's manufacturing nature, proper declaration of stock, and credit availed in accordance with Notification No. 35/2003-C.E. (N.T.). The absence of a provision mandating credit reversal for cleared inputs led to the rejection of the demand for credit reversal. The impugned order was set aside, and the appeal was allowed, emphasizing the necessity of valid grounds for credit reversal demands.

This detailed analysis of the legal judgment from the Appellate Tribunal CESTAT, Ahmedabad, highlights the issues, arguments presented, interpretation of relevant notifications, and the Tribunal's decision, providing a comprehensive understanding of the case.