Deemed credit under Notification No. 6/2002-C.E. (N.T.) cannot be denied merely because underlying yarn was not duty paid.

Deemed credit under Notification No. 6/2002-C.E. (N.T.) was available on gray fabrics received for processing because the notification expressly allowed credit on declared inputs at the specified rate notwithstanding the actual duty paid on those inputs. The text contained no condition that the gray fabrics must be manufactured from duty-paid yarn, and such a restriction could not be implied by reference to legislative intent. As the actual duty discharged on the underlying inputs was not the controlling factor, denial of deemed credit on the ground that the yarn was not duty paid was not sustainable, and the assessee's entitlement was upheld.

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Issues: Whether deemed credit under Notification No. 6/2002-C.E. (N.T.), dated 01-03-2002 was admissible on gray fabrics received for processing even though the yarn used in their manufacture was not duty paid, and whether the actual duty paid on the declared inputs could be treated as relevant for denying such credit.

Analysis: The notification granted deemed credit at the specified rate on declared inputs received for processing, and its Explanation I stated that the credit of declared duty shall be deemed to be equivalent to the amount specified in the notification notwithstanding the actual amount of duty paid on such inputs. The text of the notification did not impose any condition that gray fabrics must be manufactured from duty-paid yarn, and no such restriction could be read into it by implication or legislative intent. On a plain reading, the actual duty discharged on the inputs was not the controlling factor for eligibility to deemed credit.

Conclusion: Deemed credit was admissible, and denial of credit on the ground that the yarn was not duty paid was not sustainable; the finding was in favour of the assessee.

Final Conclusion: The order allowing deemed credit was upheld and the Revenue's appeal failed.

Ratio Decidendi: Where a deemed credit notification expressly provides that credit shall be allowed notwithstanding the actual duty paid on declared inputs, eligibility cannot be denied by importing an unstated requirement of duty payment on the underlying inputs.

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