2004 (5) TMI 499 - AT - Central Excise

Summary

Issues:
1. Denial of deemed Modvat credit under Notifications 21/99, 29/96, 28/2000, and 7/2001 to a Composite Mill for fabrics obtained for processing and clearance.

Analysis:
The Appellate Tribunal CESTAT, Mumbai, heard the case where the Appellants, a Composite Mill, were availing deemed Modvat credit under various notifications for fabrics obtained for processing and clearance. The lower authorities had initiated proceedings to deny the deemed credit. The CCE (Appeals) disallowed credit from 1-3-2001 onwards, following a previous order in the appellant's own case, interpreting para 5 of Notification 29/96. It was noted that Notification 29/96 was superseded by Notification 28/2000, with no material differences. Demands up to the validity of 28/2000 were set aside. However, demands from 1-3-2001 governed by Notification 7/2001 were ordered to be confirmed, as the wording of para 5 was different, indicating that credit on yarn contained in unprocessed fabrics was availed, making deemed credit unavailable on such unprocessed fabrics.

Further examination of Para 5 of Notification 7/2001 revealed that for a composite mill, the notification applied to processed fabrics manufactured from unprocessed fabrics not woven in the same mill, provided no credit was taken on the declared inputs in such unprocessed fabrics under any rule or notification. This implied that unprocessed fabrics woven in the same mill, where no credit on inputs was taken, would also be eligible for deemed credit. Only unprocessed fabrics woven in the same mills where credit was claimed were to be excluded. In the present case, unprocessed fabrics were woven by independent weavers using "duty paid yarn," not under Credit Rules. Therefore, deemed credit was deemed available on such unprocessed fabrics, leading to the setting aside of the order and allowing the appeal.

In conclusion, the judgment clarified the eligibility of deemed Modvat credit for a Composite Mill under various notifications, emphasizing the conditions under which such credit could be availed for fabrics obtained for processing and clearance. The interpretation of relevant notifications and the distinction between fabrics woven in the same mill and those woven by independent weavers played a crucial role in determining the availability of deemed credit, ultimately leading to the allowance of the appeal.