Credit valuation under textile notification excludes processing costs and margin, with suppression supporting extended limitation and penalty.

Credit under Notification No. 35/2003-C.E. (N.T.) had to be computed on the deemed value of inputs lying in stock or in process as on 1 April 2003, so processing charges, colours and chemicals, transportation charges, profit and margin could not be added to inflate the credit base. The claim that semi-finished goods could be treated as inputs for the assessee's own unit was rejected, and the textile decision relied on was found inapplicable on the facts. Suppression was inferred from the failure to disclose the valuation method, making the extended limitation and penalty under Section 11AC sustainable, subject to the available reduced penalty option.

---

---

Issues: Whether, for claiming credit under Notification No. 35/2003-C.E. (N.T.), the assessee could include processing charges, colours and chemicals, transportation charges, profit and margin in the value of fabrics lying in stock or in process, and whether the demand, extended limitation and penalty under Section 11AC were sustainable.

Analysis: The credit under the notification was required to be computed on the relevant deemed value of inputs lying in stock or in process as on 1 April 2003. The appellant had included various post-manufacturing and processing elements in the declared value of fabrics to enhance the credit claimed. The contention that semi-finished goods could be treated as inputs for the appellant's own unit was rejected. The value adopted for credit was held to be liable to reduction by the impugned components, and the claim based on the cited textile decision was found inapplicable on the facts. As the appellant did not disclose the manner in which the value was arrived at, suppression of facts was inferred, making the extended period invocable. In view of suppression, penalty under Section 11AC was upheld, though the reduced penalty option of 25% within the stipulated time was directed to be available.

Conclusion: The valuation adopted by the appellant was impermissible, the duty demand and penalty were upheld, and the appeal failed.

---