2003 (9) TMI 165 - AT - Central Excise

Summary

Issues:
Denial of deemed credit under Notification No. 7/2001 C.E. for the manufacture of processed pile fabrics from unprocessed pile fabrics made out of duty paid viscose yarn.

Analysis:
The appellants were denied the benefit of deemed credit under Notification No. 7/2001 C.E. for using unprocessed pile fabrics as an input in the manufacture of processed pile fabrics. The denial was based on two grounds: firstly, unprocessed pile fabrics were not considered a specified input under the Notification, and secondly, no duty had been paid on the unprocessed pile fabrics.

Upon hearing both sides, the Tribunal referred to a previous case involving grey fabrics and deemed credit under a similar Notification. The Tribunal held that the scope of Notification No. 7/2001 was not narrower than that of the previous Notification, rejecting the argument that the expression "hereinafter referred to as the declared inputs" restricted the scope of the current Notification. Consequently, the first ground of denial was deemed unsustainable.

Regarding the second ground of denial, the Tribunal considered unprocessed pile fabrics as an intermediate product, with the input being duty paid viscose yarn and the final product being processed pile fabric cleared on payment of duty. Citing precedents, including a Tribunal decision on an intermediate product "Bus-bar" and a Supreme Court order on Modvat credit for inputs used in the manufacture of intermediate products, the Tribunal concluded that deemed credit cannot be denied based on the lack of duty payment on the intermediate product.

In light of the analysis, the impugned order was set aside, and the appeal was allowed with consequential relief due to the appellants.