2005 (4) TMI 237 - AT - Central Excise

Summary

Issues:
1. Confirmation of demand of duty and imposition of penalty by Commissioner, Central Excise.
2. Denial of deemed credit under Notification No. 6/2002-C.E. to the appellants.
3. Adjudication of Show Cause Notice proposing denial of benefit of deemed credit.
4. Confirmation of demands of duty and penalties through Show Cause Notices.
5. Interpretation of the expression "same composite mill" in Notification 6/2002.
6. Eligibility of the appellants for actual Cenvat credit under Rule 2(1)B of the Cenvat Credit Rules 2002.

Analysis:
1. The appeals arose from orders confirming duty demands and penalties imposed by the Commissioner, Central Excise and Commissioner (Appeals). The appellants, engaged in manufacturing yarn and fabrics, were subject to demands and penalties based on Notifications related to grey fabrics and composite mills.

2. The issue revolved around the denial of deemed credit under Notification No. 6/2002-C.E. to the appellants due to the manufacturing setup of the Multi Locational Composite Mill. The department contended that the benefit of deemed credit was not available to the appellants as grey fabrics were manufactured in the same Multi Locational Composite Mill.

3. The Show Cause Notice dated 25-3-2003 proposed the denial of deemed credit, recovery of duty, disallowance of credit, and imposition of penalties. The Asst. Commissioner confirmed the demand and penalties, which were upheld by the Commissioner (Appeals), leading to the challenge in Appeal No. E/2585/04.

4. The Commissioner of Central Excise's order disposed of Show Cause Notices confirming duty demands and penalties, leading to the appeal in Appeal No. 2550/04.

5. The Tribunal considered the arguments of both sides in the matter.

6. The Tribunal rejected the argument that the expression "same composite mill" in Notification 6/2002 should be interpreted as "same factory." It held that the benefit of the Notification was not admissible to the appellants due to the clear language of the Notification and the definition of composite mill during the period in dispute.

7. However, the Tribunal accepted the alternative plea that the appellants were eligible for actual Cenvat credit under Rule 2(1)B of the Cenvat Credit Rules 2002, as duty had been paid on yarn contained in the grey fabrics. The Tribunal noted that the actual credit taken was less than the duty paid on the yarn, supporting the appellants' entitlement to actual credit.

8. Consequently, the Tribunal ruled in favor of the appellants, allowing them actual credit, setting aside the demands and penalties, and allowing the appeals.