Grey fabrics as inputs for CENVAT credit remain eligible despite dealer intermediation under the notification.

Grey man-made fabrics remained inputs for the processor even when routed through a dealer, because the dealer's presence did not alter the character of the goods for CENVAT purposes. Notification No. 35/2003-CE(NT) was read to cover stock held by traders and processors alike, so declared stock of grey fabrics was eligible for credit as input rather than being treated as finished goods in stock. The prior judicial view on the same point was followed, and the Revenue's challenge failed, sustaining the order allowing credit.

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Issues: Whether declared stock of grey man-made fabrics held by a dealer was eligible for CENVAT credit as input under Notification No. 35/2003-CE(NT) dated 10.04.2003, or was to be treated as finished goods in stock.

Analysis: Grey fabrics are finished goods in the hands of the manufacturer, but they remain inputs for the processor who uses them for further processing. The presence of a dealer between the manufacturer and the processor does not change the nature of the goods as input. The notification contemplated credit not only for stock with traders but also for stock with processors. The same view had already been approved in earlier judicial consideration, and no reason existed to depart from it.

Conclusion: The declared stock of grey man-made fabrics was to be treated as input for the purpose of CENVAT credit under the notification, and the Revenue's challenge failed.

Final Conclusion: The order allowing credit was sustained and the Revenue's appeal stood rejected.

Ratio Decidendi: Introduction of a dealer between the manufacturer and the processor does not alter the character of grey fabrics as input for the processor, and such stock remains eligible for CENVAT credit under the relevant notification.

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