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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether deemed credit under Notification No. 6/2002-C.E. (N.T.) was available in respect of grey fabrics procured from the market and used in the manufacture of exported goods, so as to justify refund of unutilized credit.
Analysis: The credit scheme was read in the light of the Board's circulars, which clarified that deemed credit represented the duty incidence embedded in the inputs used in the fabrics, including yarn, chemicals, dyes and packing materials. Even though the grey fabrics themselves were not dutiable during the relevant period and were not specifically declared as eligible inputs in the notification, the clarification showed that the scheme took account of the duty burden on the inputs contained in such fabrics. On that basis, the bar relied upon by the lower appellate authority could not be sustained.
Conclusion: Deemed credit was admissible, and the refund of unutilized credit was allowable in favour of the assessee.
Final Conclusion: The denial of refund was set aside and the assessee was granted the benefit of consequential relief.
Ratio Decidendi: Where the departmental circulars clarify that deemed credit is intended to neutralize the duty incidence on inputs embedded in grey fabrics, the benefit cannot be denied merely because the grey fabrics themselves were not dutiable or expressly named as eligible inputs in the notification.
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