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TMI Blog2009 (5) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant. Shri S.N. Srivastava, SDR, for the Respondent. [Order per: M. Veeraiyan, Member (T) (for the Bench)]. - This is an appeal against the order of Commissioner (Appeals), dated 16-9-2004. 2. Heard both sides. 3. The appellant is an independent processor. They received grey cotton fabrics falling under Chapter 5207 and unprocessed man-made fabrics and processed the same and cleared the processed fabrics on payment of excise duty. They availed the benefit of Notification No. 6/02-C.E., dated 1-3-02 and took deemed credit while paying the duty on the finished processed fabrics cleared by them. 4. The original authority held that the grey cotton fabrics and unprocessed man-made fabrics have not been specifically listed as inputs under column 2 of the said Notification and therefore, while clearing the final products i.e. processed cotton fabrics and man-made fabrics, the appellant was not eligible for deemed credit, accordingly, confirmed the demand of duty of Rs. 9,27,509/- along with interest and imposed equal penalty. The Commissioner (Appeals) upheld the order of the original authority. 5.1 Learned Company Secretary appearing for the appellant submits t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified regarding the duty paid nature of the yarn. He also submits that as the inputs have not been mentioned in Column 2 of the said Notification, therefore, he seeks upholding of the order of Commissioner (Appeals). He also submits that grey cotton fabrics have always been exempted during the relevant period. 7.1 We have carefully considered the submissions from both the sides. Notification No. 6/2002-C.E. (N.T.) has been issued under Rule 11 prescribing the deemed credit. This is a departure from the normal scheme of Modvat credit by which actual duty paid on the inputs are made available as the credit based on the duty paying documents. 7.2 The relevant portion of the notification is reproduced below: "In exercise of the powers conferred by Rule 11 of the Cenvat Credit Rules, 2002, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 53/2001-Central Excise (N.T.), dated the 29th June, 2001, published in the Gazette of India vide number G.S.R. 497(E), dated the 29th June, 2001, except as respects things done or omitted to have been done before such supersession, the Central Government, hereby declares the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heading No. 5901.10 of the said First Schedule. 2. The Central Government further declares that, - (i) the duty of excise under the Central Excise Act, 1944 (1 of 1944); (ii) the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975); or (iii) the additional duty of excise under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), (hereinafter referred to as the declared duty) shall be deemed to have been paid on the declared inputs and the same,- (i) in case of a composite mill, shall be equivalent to the amount calculated at the rate of, - (a) 26 per cent. of the aggregate of the duty of excise leviable under the Central Excise Act, 1944 and the additional duty of excise leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) read with any notification for the time being in force, on the final products of cotton (not containing any other textile material) declared herein; (b) 60 per cent. of the aggregate of the duty of excise leviable under the Central Excise Act, 1944 and the additional duty of excise leviable under the Additional Duties of Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of final products other than the said final products." 7.3 A careful reading of the notification reveal that it does not provide for one to one correlation of inputs mentioned in Column 2 and with finished products mentioned in Column 3. It also mentions the dyes, chemicals, consumables, packing materials as inputs generally in respect of S. No. 2. The wording of explanation 3 appearing in Clause (6) gives an indication that grey fabrics used for processing and the fabrics may be covered by the deemed credit provided under the said Notification. It is not disputed that the yarn/fabrics is contained in the processed fabrics. It is true that they are not directly used in the processed fabrics but in the grey fabrics or unprocessed fabrics. The Board's clarification dated 13-3-2003 dealing with substantially similar notification has acknowledged the fact that grey fabrics though not subjected to duty were made out of duty paid yarn and fibres and eligible for the concession. The exemption for yarn as pointed out by the learned DR was admittedly in force during the period of currency of the Notification 29/96. 7.4 Further, the Tribunal in the case of M/s. Damini Printers (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imposition of basic duty on grey fabrics being manufactured by thousands of powerlooms. The Board has also clarified vide Circular No. 243/77/96-CX., dated 3-9-1996 that the rate of deemed credit in case of fabrics is in lieu of duty paid on inputs by the processors. Para 4.5 of the Circular clearly mentioned that deemed credit is in lieu of duty paid on fabrics, yarns, dyes, chemicals, consumables and packaging materials. By issuing Notification No. 6/2002 the Central Government has only declared the inputs and final products in respect of which the deemed credit would be available. The Notification read with Rule 11 makes it very clear that it is not necessary to declare inputs which are used directly by the manufacturer of the final products. What is required for the purpose of being eligible to get the deemed credit is that declared inputs are contained in the final products. It is not the case of the Revenue that the declared inputs i.e. yarn is not contained in the final products. If the contention of the Revenue is accepted, manufacture other than the composite mill will never be eligible to avail the deemed credit under Notification as they will always be bringing only th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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