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TMI Blog2011 (5) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue and Shri Devan Parikh, learned advocate appearing for the respondent. 2. As per facts on record, M/s Ashima Dyecot Pvt.Ltd. are engaged in manufacture of processed cotton and man made fabrics falling under Chapter 52 & 55 of Schedule to Customs Excise Tariff Act, 1985. They were using the grey fabrics for the said purpose and were procuring the same from other 100% EOUs, who were clearing the same on payment of duty. In respect of cotton fabrics, they were availing the benefit of deemed MODVAT Credit in terms of Notification No.7/2001-CE(NT), dt.1.3.01 and 53/2001-CE(NT) DT.29.6.01. The said notifications provided a certain percentage of the duty paid at the time of final clearance of product to be availed as deemed MODVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h availment of credit at the time of clearance of processed fabrics. 3. In the above backdrop, proceedings were initiated against the assessee by way of issuance of Show Cause Notice dt.7.3.03, proposing to deny the credit so availed by the respondent on 27.2.02 in the light of their letter dt.25.2.02. The said proposed credits were denied by adjudicating authority who confirmed the same and imposed penalty. On appeal against the said order, the Commissioner(Appeals) agreed with the lower authority that deemed credit of Rs.28,43,967/- (Rupees Twenty Eight Lakhs, Forty Three Thousands, Nine Hundred and Sixty Seven only) availed in terms of notifications, in respect of Denim fabrics cannot be allowed, inasmuch as the said notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 100% EOU in terms of provisions of Rule 3 of CENVAT Credit Rules as also deemed MODVAT Credit in terms of Notification No.7/2001-CE(NT), and No.53/2001-CE(NT). The appellate authority has observed that MODVAT Credit is a system designed to avoid the payment of duty on duty through a long chain of manufacturers, where at each stage, duty is paid. In the case of fabrics, for example, duty is paid on yarn, grey fabrics, finished fabrics and garments. Normally, the duty paid at each stage is taken as credit for duty paid at the next stage. However, in the case of grey fabrics during the period in question, this chain was broken, since grey fabrics were exempted from duty. In order that the duties paid on the inputs used in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 3 of the CENVAT Credit Rules, 2001, in respect of the declared inputs and the declared inputs are used in the manufacture of the said final products. Explanation: It is clarified that the CENVAT Credit in respect of capital goods, under Rule 3 of CENVAT Credit Rules, 2001, shall be allowed to the said manufacturer (other than a composite mill) subject to the conditions as specified under Rule 4 of that rules. 7. The notification has defined declared inputs as being the inputs falling within the table in the notification i.e. yarns, dyes, chemicals, consumables, packing materials. A clear reading of the notification, therefore, shows that the deemed credit under Notification No.53/2001-CE(NT) is not available to a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a factor debarring an assessee to avail deemed MODVAT Credit in terms of Para 4 of Notification No.53/2001, which covers the period in question. 10. Further, Notification No.6/2001 was subsequently amended by Notification No.16/2002, dt.27.4.02, wherein the words or unprocessed fabrics appearing in Para 4 of the notification were omitted, thus entitling the assessee to avail deemed MODVAT Credit in terms of notification as also the actual MODVAT Credit of duty paid on the grey fabrics. It has to be kept in mind that the grey fabrics are not one of the specified inputs in the notification for deemed MODVAT Credit, the same is for various other items/inputs which have gone into the manufacture of grey fabrics which were exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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