2007 (11) TMI 198 - AT - Central Excise

Mfg. man made fabrics and cotton fabrics using grey fabric as input - Notification No. 6/2002 and 35/2003, deemed credit was allowed in respect of input and final product lying in stock - respondents availed the deemed credit in respect of grey fabric lying in stock as per the notification credit cannot be denied because Not. 6/02 gives benefit in respect of finished goods & not. 35/03 grants benefit of deemed credit so deemed credit has been rightly claimed on grey fabrics

Summary

Issues: Revenue appeal against deemed credit availed under Notification No. 35/2003.

Analysis:
1. Issue: Correct availing of deemed credit under Notification No. 35/2003
- The appellants, engaged in manufacturing fabrics, availed deemed credit under Notification No. 35/2003 for grey fabric in stock, triggering a show cause notice for allegedly availing excess credit under Notification No. 6/2002.
- The revenue argued that the appellants incorrectly availed credit under Notification No. 35/2003, citing Rule 9A provisions for credit availing based on duty paying documents or alternative provisions under Rule 9A(3).
- The Commissioner (Appeals) analyzed Rule 9A(3)(b)(ii) of Cenvat Credit Rules, determining credit for inputs in fabrics or garments in stock, which differs from credit for finished products. The Commissioner found that grey fabric, not a finished product, falls under a different provision (para 3(b)(iii)), allowing credit under Notification No. 35/2003.
- The Commissioner upheld the correctness of the respondent's availing of deemed credit under Notification No. 35/2003, supported by a government letter clarifying credit allowance for inputs and finished goods in stock as of 31-3-2003.

2. Judgment and Conclusion:
- The Commissioner found no infirmity in the impugned order, supporting the respondent's availing of deemed credit for grey fabric under Notification No. 35/2003, distinct from the provisions of Notification No. 6/2002 applicable to finished goods.
- The revenue did not dispute the availing of deemed credit for grey fabric, acknowledging its status as an input for manufacturing, leading to the rejection of the appeal.
- The impugned order was deemed legal, just, and maintainable, with the Commissioner upholding the correctness of the respondent's actions under Notification No. 35/2003.
- The judgment highlights the importance of proper interpretation and application of relevant rules and notifications in determining the eligibility and correctness of availed credits under the Cenvat Credit Rules, ensuring compliance with legal provisions and notifications for tax benefits.