Deemed Cenvat credit under fabric-processing notification cannot be denied absent input correlation; extended limitation needs factual support.

Notification No. 6/2002-C.E. (N.T.) permits deemed Cenvat credit for fabric processors up to 66.67% of the duty payable on finished goods without requiring correlation between grey fabrics received and duty-paid input invoices. Clearance on duty-paid excise invoices and ARE-1s, together with cash duty payment through PLA, supports entitlement to the credit; alleged forgery in another concern's rebate documents does not by itself defeat that entitlement. Extended limitation is not available where goods were received under challans and invoices, monthly returns were filed, and the show cause notice was issued nearly five years later without the necessary factual foundation.

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Issues: (i) whether the appellant was entitled to avail deemed Cenvat credit on processed fabrics cleared on payment of duty under Notification No. 6/2002-C.E. (N.T.); (ii) whether invocation of the extended period of limitation was justified.

Issue (i): Whether the appellant was entitled to avail deemed Cenvat credit on processed fabrics cleared on payment of duty under Notification No. 6/2002-C.E. (N.T.).

Analysis: The notification permitted deemed Cenvat credit to a processor of fabrics to the extent of 66.67% of the duty payable on finished goods. The credit scheme did not require correlation between the grey fabrics received and duty-paid input invoices. The record also showed clearance on payment of duty through excise invoices and ARE-1s, with substantial duty paid in cash through PLA. The fact that the rebate documents of another concern were found forged did not by itself defeat the appellant's entitlement to deemed credit.

Conclusion: The appellant was entitled to avail deemed Cenvat credit, and the denial of such credit was unsustainable.

Issue (ii): Whether invocation of the extended period of limitation was justified.

Analysis: The grey fabrics were received under challans and invoices, the processed goods were cleared on payment of duty, and monthly returns were filed. The show cause notice was issued nearly five years after the clearances in question. On these facts, the ingredients necessary for extended limitation were not established.

Conclusion: Invocation of the extended period of limitation was not justified.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where a notification grants deemed credit without requiring co-relation of inputs to duty-paid documents, the credit cannot be denied absent a legally sustainable basis, and extended limitation cannot be invoked without the necessary factual foundation.

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