Deemed credit on grey fabrics across composite mills was held arguable, supporting waiver of pre-deposit pending appeal.

Deemed credit on grey fabrics transferred between different units of the same composite company was treated as arguable under the Cenvat notification scheme. The tribunal read the notification and explanatory material as denying deemed credit primarily where unprocessed fabrics were used for further processing within the same mill, not where grey fabrics moved between distinct composite mills under the same management. On that basis, the appellant showed a prima facie case for relief, and waiver of pre-deposit of duty and penalty was granted pending the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit of duty and penalty in relation to deemed credit on grey fabrics received for processing under the relevant Cenvat and notification scheme.

Analysis: The fabrics were manufactured in one unit of the same multi-locational composite company and transferred to another unit for further processing. The notification and explanatory material were read as indicating that deemed credit was intended to be denied only where unprocessed fabrics were used in the same mill for further processing, and not where grey fabrics moved between different composite mills of the same management. On that reading, the appellant's claim was held to be arguable and the matter was treated as not free from doubt.

Conclusion: The appellant established a prima facie case and pre-deposit of duty and penalty was waived during the pendency of the appeal.

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