Transitional credit on grey fabrics treated as input, with dealer involvement not defeating eligibility.

Grey fabrics held by a dealer could still qualify as "input" for transitional credit, because their character as input for the processor was not changed by the dealer's interposition. The notification governing transitional credit was read as covering stock with traders as well as stock lying with processors, and the absence of a declaration of stock under Rule 9(A) did not defeat credit on these facts. The Tribunal's view was upheld, and the challenge to the credit grant failed.

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Issues: Whether grey fabrics held by a dealer could be treated as "input" for the purpose of transitional credit under Notification No. 35/2003-C.E. (N.T.) dated 10-4-2003, and whether such credit could be allowed without the declaration of stock required under Rule 9(A) of the CENVAT Credit Rules, 2002.

Analysis: Grey fabrics were treated as finished goods for the manufacturer, but as input for the processor carrying them for further processing. The interposition of a dealer between the manufacturer and the processor did not alter the character of the goods as input. The notification contemplated credit not only for stock with traders but also for stock lying with processors. On these facts, the Tribunal's view was found to be correct.

Conclusion: The grey fabrics were eligible to be treated as input for transitional credit purposes, and the challenge to the grant of credit failed.

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