Actual credit on processed fabrics and deemed credit on grey fabrics can coexist where the notification does not prohibit both.

Notification 29/96 governed deemed credit for specified grey fabrics and did not, on its terms, exclude actual credit under Rule 57A(1) on separately received processed fabrics. The trade notice relied upon also recognised that, for partially processed fabrics, actual duty paid earlier could be taken as credit under Rule 57A(1). Since the authorities failed to distinguish grey fabrics from processed fabrics or show any bar on concurrent operation of the two credit mechanisms, denial of credit and penalty were unsustainable and the adverse order was set aside.

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Issues: Whether the appellant was entitled to avail actual credit under Rule 57A(1) on processed fabrics received as inputs while also availing deemed credit under Notification 29/96 for grey fabrics.

Analysis: Notification 29/96 operated in respect of deemed credit for specified inputs and excluded its application only in the situations covered by its express terms. The trade notice relied upon dealt with deemed credit and did not support denial of actual credit under Rule 57A(1). Paragraph 5.2 of the trade notice specifically contemplated that, in the case of partially processed fabrics, credit of actual duty paid earlier would be available under Rule 57A(1). The adjudicating authority and the appellate authority failed to consider this distinction between grey fabrics and processed fabrics and did not show why both forms of credit could not be availed in the manner adopted by the appellant.

Conclusion: The appellant was entitled to avail the credit claimed, and the denial of credit and penalty were unsustainable.

Final Conclusion: The appeal succeeded and the adverse order was set aside.

Ratio Decidendi: Where the notification governing deemed credit does not prohibit actual credit on separately received processed inputs, and the departmental trade notice itself recognises availability of actual duty credit on partially processed fabrics, both credits may be availed in accordance with their respective fields of operation.

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