2003 (8) TMI 547

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....ee had a project to set up a composite mill for spinning, weaving and processing, The first phase related to cotton yarn spinning of different counts. For this phase of the project the company imported capital goods and installed the same during March 1996. They availed modvat credit on its capital goods since the finished product, namely, cotton yarn was dutiable. After manufacturing cotton yarn during the first year and after creating good export market for the same, it went into the second phase of manufacturing grey fabric, a product which is non-dutiable. This part of the project was implemented in September 1998 by using both imported and indigenous machinery. Since the final product at the end of second phase was non-dutiable the ass....

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....stalled during the second phase when grey fabrics were manufactured are not eligible for credit of duty. Aggrieved by the above order, the assessee filed an appeal. The Commissioner (Appeals) took the view that the original authority has committed an error in holding that the assessee was not 'eligible for availing credit on the capital goods installed during implementation of second phase of project for the reason that during that period the final product, namely, grey fabric was exempted from payment of duty. He was inclined to accept the contation raised by the assessee that since the composite mill has been set up in three phases and since on completion of the third phase processed fabric was manufactured as final product, the appel....

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....nt is entitled to utilise the credit taken on capital goods acquired at the time of second phase after commencement of manufacturing of processed fabric in the third phase. 3. We heard the learned DR and the learned counsel for the respondent. Reliance was placed by the Revenue - appellant on a decision of this Tribunal in CCE Coimbatore vs. Sengunthar Spinning Mills 1998 (99) ELT 409 (T). According to us the facts of the case are entirely different from those available in the case in hand. At the time of acquisition of the capital goods the final product coming under Heading 52.02 stood excluded from liability to duty. It was then held that when modvat credit could not be taken at the time when the goods were received, the question of mak....