TaxTMI 
TaxTMI 
2010 (2) TMI 361
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....ect input in the assessee's final product processed fabric, in view of the Notification No. 6/2002-C.E. (N.T.), dated 1st March, 2002? 3. Counsel for the parties are agreed that this appeal can be taken up straightaway and, therefore, they addressed arguments at this stage itself. Since the question was one of interpretation of the notification, counsel for the parties also submitted that there is also no necessity of filing any paper book inasmuch as the relevant documents are already on record. 4. We have heard the counsel for the parties. 5. The learned counsel appearing on behalf of the Revenue/appellant contended that the said notification referred to a table of inputs and final products. According to him the input of the resp....
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....e direct input is grey fabric which is processed to manufacture the final product-processed fabric. However, the grey fabric which is directly used as an input, in turn, contains fibre/yarn which is a direct input insofar as grey fabric is concerned. A reference was also made by the learned counsel to the Circular No. 702/18/2003-CX dated 13th March, 2003, which was in connection with an issue which arose with regard to refund of unutilized deemed credit of Cenvat on grey fabrics used in the processed fabrics exported under bond. In that context the circular discussed Notification No. 29/96-C.E. (N.T.), dated 3rd September, 1996 which was the predecessor notification to the present Notification No. 6 pertaining to availment of deemed credit....
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....cation, but are contained in the said final products." (underlining added) 8. It is pertinent to note that the said rule makes it clear that Cenvat credit is to be allowed in respect of the inputs even if the declared inputs are not used directly by the manufacturer of the final products declared in a notification under Rule 11 but are contained in the final products. 9. Notification No. 6/2002-C.E.(N.T.) dated 1st March, 2002 to the extent relevant is set out herein below : "Notification: 6/2002-C.E. (N.T.) dated 1-Mar.-2002 Deemed credit for independent textile processors and composite mills — Notification No. 53/2001-C.E. (N.T.). superseded. In exercise of the powers conferred by Rule 11 of the Cenvat Credit Rules, 20....
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....chedule. (2) (i) Goods falling within heading Nos. 51.05, 51.06, 51.07, 52.05, 52.06, 53.06, 53.07, 53.08, 54.02, 54.03, 54.04, 54.05, 55.01, 55.02, 55.03, 55.04, 55.05, 55.06, 55.07, 55.09, 55.10, 56.04, 56.05 or 56.06 of the said First Schedule; The following goods manufactured by a manufacturer other than a composite mill, namely :- (i) Processed fabrics falling under Chapters 52 (except sub-heading Nos. 5207.20, 5208.20 and 5209.10), 54 (except sub-heading Nos. 5406.10………………) ……………………. …………………….." 6. The provisions of this notification shall not apply to final products on which duty of excise leviable under the Central Excise Act, 1944, or as the case may be, the additiona....
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....bric itself issued as an input for further processing. ………….. …………." 10. A plain reading of the said notification shows that a distinction has been drawn out between the composite mills and other than composite mills. Explanation 2 to Clause (6) of the notification makes it clear as to what is meant by a composite mill. It means, a manufacturer who is engaged in the processing of fabrics with the aid of power along with the spinning of yarn from fibres and weaving or knitting or crocheting of fabrics within the same factory etc. The respondent, as already mentioned above, is not a composite mill. It manufactures its final product-processed fabrics not by spinning of the yarn from fabrics but from grey fabric purchas....
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....e was not correct inasmuch as the said Notification No. 6/2002 had been issued under Rule 11 of the Cenvat Credit Rules, 2002, which clearly provided that the deemed credit would be available even if the declared inputs are not used directly by the manufacturer of the final products declared in the notification but are contained in the said final products. 12. In fact the provisions of Rule 11 are very clear. Grey fabrics in the present case, though not mentioned in the table of inputs referred to in the notification, comprised of yarn fibre which are the inputs in respect of grey fabrics. Grey fabrics are also not processed fabrics and therefore, are not covered by Explanation 3 to Clause (6) of the said notification. The processed fabr....