Rule 57A credit on semi-processed fabrics remains admissible where duty was actually paid, including through deemed credit.

Credit under Rule 57A was available on semi-processed fabrics received by a processor where duty had in fact been paid on those inputs, even if part of that duty was discharged by the first processor through deemed credit. The rule required only that duty be paid on the inputs received; it did not limit admissibility to duty paid from PLA. The deemed credit notification barred only the grant of deemed credit on receipt of semi-processed fabrics and did not prevent the recipient from taking credit of actual duty paid. Credit on the duty actually paid was therefore admissible, including the portion paid through deemed credit, and the demand disallowing it was unsustainable.

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Issues: Whether credit under Rule 57A was admissible on semi-processed fabrics received by the processor even when part of the duty on such fabrics had been discharged by the first processor out of deemed credit.

Analysis: The entitlement under Rule 57A turned on whether duty had been paid on the inputs received by the manufacturer of the final product. The rule did not impose any restriction that such duty must necessarily have been paid only from PLA. Duty paid out of a credit account also constituted duty paid on the inputs for the recipient. The exclusion in the deemed credit notification concerned the availability of deemed credit on receipt of semi-processed fabrics and did not bar a recipient from taking credit of actual duty paid on such fabrics. The Board's circular also supported availability of credit on partially processed fabrics, and there was no basis to confine credit only to the portion discharged from PLA.

Conclusion: Credit of the duty actually paid on the semi-processed fabrics was admissible to the assessee, including the portion paid through deemed credit. The demand disallowing such credit was unsustainable.

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