2023 (1) TMI 1137 - AT - Central Excise

Denial of benefit of Deemed Credit - It is the case of the revenue that appellants had received Cotton Printed Fabrics, therefore as per Explanation 3 to the said Notification benefit of said Notification cannot be extended to the appellants - HELD THAT - From the finding of tribunal it is clear that the tribunal has given direction to verify the facts that Appellants have received grey fabrics or not if received grant the benefit of notifications. However ongoing through the finding of both adjudicating authority and documents submitted by the appellants we find that appellants have failed to produce authentic documents regarding the receipts of grey fabrics. No original copies of bills/ invoices and transport documents related to the receipts of grey fabrics are available with any of the appellant. Further, ongoing through the relevant Explanation of the Notifications it is found that it has been expressly provided therein that, where processed fabrics itself is used as an input for further processing then, the provisions of the notification are not applicable. The denial of deemed credit to the appellants by the lower authorities in absence of the proper documentary evidence appears to be prima facie correct. However, to meet the end of justice, one more opportunity can be given to the appellants for production of all the documents which prove that they had received the grey fabric and consequently eligible to deemed credit. The matter may be reconsidered once again - Appeal allowed by way of remand.

Issues Involved:
1. Eligibility of appellants to avail the benefit of deemed credit under specific Notifications.
2. Verification of receipt of grey fabrics by the appellants.
3. Interpretation of Explanation 3 to the relevant Notifications.
4. Production and adequacy of documentary evidence to support claims of receiving grey fabrics.

Detailed Analysis:

Eligibility of Appellants to Avail Benefit of Deemed Credit:
The appellants sought the benefit of deemed credit under various Notifications (No. 28/2000-CE(NT), No. 07/2001-CE(NT), No. 53/2001-CE(NT), and No. 6/2002-CE(NT)). The primary issue was whether the benefit could be extended to them in terms of Explanation 3 of these Notifications. The revenue argued that the appellants received Cotton Printed Fabrics, thus disqualifying them from the deemed credit benefit as per the Notifications. The appellants contended they received Cotton Grey Fabrics, which were then processed by job workers for bleaching and mercerizing, making them eligible for the deemed credit.

Verification of Receipt of Grey Fabrics:
The Tribunal had previously remanded the matter to verify if the appellants received grey fabrics and sent them for job work. The appellants were required to prove the receipt of grey fabrics to avail the deemed credit. However, the lower authorities found that the appellants failed to produce original invoices and transport documents to substantiate their claim. The Tribunal noted that the appellants did not provide authentic documents regarding the receipt of grey fabrics, which was crucial for determining their eligibility for deemed credit.

Interpretation of Explanation 3 to the Relevant Notifications:
Explanation 3 of the Notifications excludes the benefit of deemed credit if processed fabrics are used as inputs for further processing within the same factory. The appellants argued that this exclusion should not apply to fabrics processed in different factories. They maintained that the explanation was intended to prevent the benefit of deemed credit at each stage of processing within the same factory, not across different factories. The Tribunal noted that the explanation aimed to prevent undue benefit by manufacturers at each stage of processing. However, the Tribunal found that the appellants' interpretation was not supported by the necessary documentary evidence.

Production and Adequacy of Documentary Evidence:
The appellants argued that they could not produce original documents due to the long duration since the transactions occurred. They claimed that the grey fabrics were received from merchant exporters and sent for job work, but the lower authorities found the evidence insufficient. The Tribunal emphasized the importance of producing authentic documents to prove the receipt of grey fabrics. Although the appellants argued that the documents were with the merchant exporters, the Tribunal held that the appellants were responsible for providing adequate proof.

Conclusion:
The Tribunal concluded that the appellants failed to produce sufficient documentary evidence to prove the receipt of grey fabrics. However, to ensure justice, the Tribunal decided to give the appellants another opportunity to present the necessary documents. The Tribunal set aside the impugned orders and remanded the matter back to the adjudicating authority for reconsideration, allowing the appellants to produce all relevant documents to establish their eligibility for deemed credit.

Final Decision:
The appeals were allowed by way of remand to the adjudicating authority for reconsideration, with instructions to the appellants to produce all necessary documents proving the receipt of grey fabrics. The Tribunal emphasized the need for proper documentary evidence to substantiate the appellants' claims.

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