Deemed credit on grey fabrics allowed where notified inputs were treated as contained in the final products under Cenvat rules.

Deemed credit on grey fabrics was admissible where the dispute concerned whether grey fabrics, though not separately declared as an input under Notification No. 6/2002-CE(NT), could qualify under Rule 11 of the Cenvat Credit Rules, 2002. The rule was applied on the basis that deemed credit is available when the notified inputs are contained in the final products, even if they are not directly used by the manufacturer. Processed fabrics were treated as final products containing yarn or fabric, so the rule's conditions were satisfied and the issue was answered in favour of the assessee and against the revenue.

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Issues: Whether deemed credit was admissible on grey fabrics as inputs though grey fabrics were not a declared input under Notification No. 6/2002-CE(NT) dated 01.03.2002.

Analysis: The question turned on Rule 11 of the Cenvat Credit Rules, 2002, which permits deemed credit where the notified inputs are contained in the final products, even if they are not directly used by the manufacturer. The processed fabrics were treated as final products containing yarn or fabric, and the requirements of the rule were held to be satisfied.

Conclusion: Deemed credit on grey fabrics was admissible. The question was answered in favour of the assessee and against the revenue.

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