Transitional Cenvat credit under Rule 9A must be computed on average input price, not added processing charges.

Rule 9A of the Cenvat Credit Rules, 2002 for transitional processed fabrics requires one-time credit to be computed on the average price of inputs and the applicable duty rate. The declaration of stock value under sub-rule (2) serves to record the description, quantity and value of stock, but it does not permit addition of processing charges when calculating credit. On that basis, excess credit based on processing charges was not justified, and waiver of pre-deposit and stay of recovery were refused.

---

---

Issues: Whether waiver of pre-deposit and stay of recovery were justified in respect of the disputed Cenvat credit, and whether process charges included in the declared stock value could be taken into account while computing one-time credit under Rule 9A of the Cenvat Credit Rules, 2002.

Analysis: Rule 9A was a transitional provision for processed fabrics. For the relevant category, the credit was to be computed on the basis of the average price of inputs and the applicable duty rate, with the declaration under sub-rule (2) relating to the description, quantity and value of stock. The requirement to declare value did not permit inclusion of processing charges for calculating one-time credit, because sub-rule (3)(a) specifically directed computation with reference to the average price of inputs. On that basis, the order disallowing the excess credit did not disclose any apparent error.

Conclusion: Waiver of pre-deposit was refused and the stay application was rejected.

Ratio Decidendi: Under Rule 9A, one-time Cenvat credit for transitional stock is to be computed on the average price of inputs, and not on processing charges added to the declared stock value.

---