Plain language of exemption notifications and actual Cenvat credit support determined relief for a composite mill.

Notification No. 6/2002-C.E. was held inapplicable to processed fabrics made from grey fabrics woven within the same multi-locational composite mill, because the notification's restriction for composite mills had to be applied according to its plain language and could not be read down from "same composite mill" to "same factory". At the same time, actual Cenvat credit on duty-paid yarn embedded in the grey fabrics was admissible under Rule 2(1)(b) because the duty paid was evidenced by excise invoices and the actual credit claim was supported by the record. On that basis, the demand and penalties were unsustainable.

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Issues: (i) Whether the benefit of Notification No. 6/2002-C.E. dated 01.03.2002 was available to a multi-locational composite mill in respect of processed fabrics manufactured from grey fabrics produced in the same composite mill; (ii) Whether the assessee was entitled to actual Cenvat credit under Rule 2(1)(b) of the Cenvat Credit Rules, 2002 on the duty paid yarn contained in the grey fabrics.

Issue (i): Whether the benefit of Notification No. 6/2002-C.E. dated 01.03.2002 was available to a multi-locational composite mill in respect of processed fabrics manufactured from grey fabrics produced in the same composite mill.

Analysis: The definition of "composite mill" during the relevant period included a multi-locational composite mill. Paragraph 5 of the notification restricted the benefit, in the case of a composite mill, to processed fabrics manufactured from unprocessed fabrics not woven in the same composite mill. The language was found to be clear and could not be rewritten by reading "same composite mill" as "same factory". The notification also covered independent processors, showing that the provision was not rendered otiose by the restriction.

Conclusion: The benefit of Notification No. 6/2002-C.E. dated 01.03.2002 was not admissible to the assessee.

Issue (ii): Whether the assessee was entitled to actual Cenvat credit under Rule 2(1)(b) of the Cenvat Credit Rules, 2002 on the duty paid yarn contained in the grey fabrics.

Analysis: The duty paid on yarn contained in the grey fabrics was not in dispute, and the actual duty paid was reflected in the central excise invoices issued by the spinning units. The amount of deemed credit already taken was less than the actual duty paid on the yarn, and the factual basis for actual credit was established.

Conclusion: The assessee was entitled to actual Cenvat credit under Rule 2(1)(b) of the Cenvat Credit Rules, 2002.

Final Conclusion: The demand and penalties were unsustainable, and the assessee obtained full relief on the basis of entitlement to actual credit.

Ratio Decidendi: A clear restrictive term in an exemption notification must be given effect according to its plain language, but where actual duty paid credit is otherwise admissible and duly supported, it cannot be denied merely because deemed credit is unavailable.

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