2004 (7) TMI 247 - AT - Central Excise

Issues:
1. Duty demand and penalty imposed on manufacturer of cotton fabrics for utilizing processed fabrics as inputs.
2. Interpretation of Notification No. 29/96-C.E. (N.T.) regarding deemed credit eligibility.
3. Discrepancy in the processes undertaken by the manufacturer and the job worker.
4. Denial of deemed credit by the Assistant Commissioner based on the use of processed fabrics as inputs.
5. Challenge to the findings of the Commissioner (Appeals) by the revenue.

Analysis:
1. The case involved a duty demand and penalty imposed on a manufacturer of cotton fabrics for utilizing processed fabrics as inputs. The Assistant Commissioner confirmed the duty demand and penalty, alleging that the manufacturer sent partly processed fabrics to a job worker and later claimed deemed credit on the processed fabrics used for further processing. The Commissioner (Appeals) observed that the manufacturer used semi-processed fabrics, not fully processed fabrics, and thus, the deemed credit was admissible.

2. The interpretation of Notification No. 29/96-C.E. (N.T.) regarding deemed credit eligibility was crucial. The Notification stated that the benefit would not apply if processed goods themselves were used as inputs. The Commissioner (Appeals) found that the manufacturer used semi-processed fabrics as inputs, making them eligible for deemed credit. The revenue challenged this finding without providing a clear counter to the Commissioner's observations.

3. There was a discrepancy in the processes undertaken by the manufacturer and the job worker. While the manufacturer claimed that the job worker only performed washing, the adjudication order mentioned additional processes like heat setting and carbonising. The lack of documentation showing the specific processes undertaken raised questions about the eligibility for deemed credit.

4. The Assistant Commissioner denied deemed credit based on the use of processed fabrics as inputs, citing Explanation-II to the Notification. However, the Commissioner (Appeals) disagreed, emphasizing that the manufacturer used semi-processed fabrics, not fully processed fabrics, making them eligible for deemed credit.

5. The revenue challenged the findings of the Commissioner (Appeals) without presenting a compelling argument. The Tribunal noted that the manufacturer received grey fabrics initially, subjected them to partial processes, and then received semi-processed fabrics back for further processing. The Tribunal concluded that the manufacturer's eligibility for deemed credit was justified, rejecting the revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, emphasizing that the manufacturer used semi-processed fabrics as inputs, making them eligible for deemed credit under the Notification. The Tribunal highlighted the importance of equitable interpretation of the law to prevent discrimination between processors with varying processing capabilities.

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