Deemed Cenvat credit on grey fabrics remained available for processing, with refund claims upheld.

Deemed Cenvat credit was treated as admissible on grey fabrics received by a processor for manufacture of processed fabrics, even though the fabrics were not specifically named as declared inputs. The Tribunal noted that the same issue had already been decided in favour of the assessee in earlier proceedings and that, in the assessee's own case for another period, the departmental objection had been dropped. As the processed goods were cleared for export under bond and some clearances were for home consumption, no material distinction was found to deny the benefit. The refund claims were therefore correctly allowed.

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Issues: Whether deemed Cenvat credit and consequential refund were admissible in respect of grey fabrics received by a processor for manufacture of processed fabrics, where the processed goods were cleared for export under bond and some clearances were for home consumption.

Analysis: The disputed period fell within the operation of the relevant textile notifications issued under the Cenvat Credit Rules. The fabrics themselves were not specifically named as declared inputs, but the Tribunal noted that the same issue had already been decided in favour of the assessee in earlier proceedings, holding that deemed credit was admissible on grey fabrics received for processing. The Tribunal also took note that in the assessee's own case for another period, the departmental objection on the same issue had been dropped, reflecting acceptance that deemed credit was available even where the declared inputs were not directly used by the processor. In these circumstances, no distinction was found warranting a different view.

Conclusion: Deemed credit was admissible on the grey fabrics and the refund claims were correctly allowed.

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