2012 (11) TMI 680 - AT - Central Excise

Cenvat credit - stocks of grey fabrics - Whether respondent-assessee is entitled to CENVAT Credit under Notification No. 35/2003-C.E. (N.T.), on the stock of grey fabrics treating the same as input or finished goods Held that - Stock of grey fabrics lying in stock with a dealer who sells processed fabrics (after getting it processed on job work by an independent processor) are stock of inputs and not stock of finished goods - When the notification makes no distinction between the dealer and the manufacturer for the purpose of credit, it is not proper to restrict the higher credit to stocks of grey fabrics with a person registered as manufacturer only. The assessee dealer is entitled to credit, treating grey fabrics as input - appeal filed by the Revenue is rejected

Summary

Issues:
Determining eligibility for CENVAT Credit under Notification No. 35/2003-C.E. (N.T.) on grey fabrics as input or finished goods.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad involved the question of whether the respondent-assessee could claim CENVAT Credit under Notification No. 35/2003-C.E. (N.T.) on the stock of grey fabrics, categorizing them as either input or finished goods. The Commissioner (Appeals) held that the grey fabrics in stock should be considered as inputs, making the assessee eligible for a higher credit rate. The Commissioner emphasized that the terms "input lying in stock" and "finished goods lying in stock" were not defined in the notification and should be interpreted based on common understanding. It was noted that the notification did not differentiate between a dealer and a manufacturer for the purpose of credit, thus entitling the dealer to credit as well. The Tribunal concurred with the Commissioner's interpretation, particularly as the appellant was a merchant-manufacturer who processed the grey fabrics before selling them, aligning with the duty levy scheme at that time.

The Tribunal upheld the Commissioner's observations and rejected the Revenue's appeal, concluding that the appellant, being a merchant-manufacturer involved in processing grey fabrics, was entitled to treat the fabrics as inputs for the purpose of claiming CENVAT Credit. The decision highlighted the importance of interpreting terms in notifications based on common understanding and the absence of discriminatory provisions between dealers and manufacturers in such cases. The judgment emphasized the relevance of the appellant's role as a merchant-manufacturer in determining the eligibility for credit under the notification, ultimately ruling in favor of the respondent-assessee and dismissing the Revenue's appeal.