2017 (1) TMI 355 - AT - Central Excise

Deemed credit in terms of N/N. 6/2002-C.E. (N.T.), dated 1-3-2002 - denial on the ground that these goods, falling under Chapter Heading 5207.20, which were received by them for processing, has not been specified as input in the notification - Held that - the said Board s Circular has made implicit the deeming provisions of said notification to the effect that the grey fabrics are manufactured out of duty paid yarn and that the yarn has suffered appropriate duty - the deemed credit availed by the respondent is clearly allowable - appeal dismissed - decided against Revenue.

Summary

Issues:
Deemed credit availed on grey fabrics under Chapter Heading 5207.20 disallowed - Interpretation of Notification No. 6/2002-C.E. (N.T.) - Applicability of C.B.E. & C. Circular No. 702/18/2003-CX.

Analysis:
The case involved a manufacturer of fabrics falling under Chapter 52 of the Central Excise Tariff Act, 1985, who availed deemed credit under Notification No. 6/2002-C.E. (N.T.), dated 1-3-2002, on grey fabrics. The issue arose when the deemed credit taken on grey fabrics, which fell under Chapter Heading 5207.20 and were received for processing, was sought to be disallowed as these goods were not specified as inputs in the said notification. The original authority and the first appellate authority allowed the credit, leading the Revenue to appeal for recovery.

Upon hearing the arguments, it was noted that both authorities below had permitted the deemed credit based on C.B.E. & C. Circular No. 702/18/2003-CX, dated 13-3-2003. The circular clarified that although grey fabrics were not explicitly listed as declared inputs in the notification, they were made from duty paid yarn/fibers, which were declared inputs and had incurred appropriate excise duty. The circular further emphasized that deemed credit was permissible even if the declared inputs were not directly used in the final product's manufacture but were present in the final product. This clarification effectively aligned the deeming provisions of the notification with the manufacturing process of grey fabrics from duty paid yarn.

The clarification provided by the C.B.E. & C. in the circular explicitly allowed the deemed credit availed by the respondent. The authorities below had rightly relied on this circular to extend the credit to the appellant. Consequently, the Tribunal found no justification to interfere with the impugned orders and dismissed the Revenue's appeals. The judgment highlighted the importance of interpreting notifications in conjunction with relevant circulars to uphold the applicability of deemed credits in line with the manufacturing processes and excise duty regulations.