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TMI Blog2014 (10) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to reverse the Cenvat Credit. However, the assessee contended that the clearances were made against CT-3 certificate issued in terms of Notification No.22/2003 dated 31.03.2003 by the customs authorities and that such clearances made to EOUs/EHTPs have the status of deemed exports and therefore, there is no need to reverse the credit involved. The Audit contended that the issuance of a CT-3 certificate does not automatically mean that the subject goods can be cleared without payment of duty or without reversing the credit involved, if it turns out that the CT-3 certificate has been issued beyond the scope or in contravention of the Notification No.22/2003 dated 31.03.2003 under which the said certificate had been issued. Condition No.(1) of para (1) of Notification No.22/2003 specifically states that the user industry should bring the excisable goods directly from the factory of manufacture or warehouse. As such, the impugned inputs and capital goods cleared as such are not eligible for the benefits of this Notification, since they are neither manufactured nor deemed to be manufactured in the factory from where they were removed. In reply, the assessee amongst other things stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the Revenue assailing the impugned order contends, as the assessee has not received the excisable goods directly from the factory of manufacture or warehouse, the condition stipulated in the Notification No.22/2003 is not fulfilled. In the instant case, the assessee has imported the impugned capital goods on which Cenvat credit has been availed and cleared without payment of duty to EHTP under the cover of CT-3 and therefore, the impugned order passed by the Tribunal is not legal and requires to be set aside. 3. Per contra, learned counsel appearing for the assessee submitted, the assessee is having the DTA unit in the ground floor and EHTP unit in the First floor. When the assessee purchased the capital goods as well as raw material, it has paid excise duty. With the permission of the authority, it has transmitted or shifted the capital goods after its use and raw material as such to the EHTP unit. When it purchased the goods it had availed Cenvat credit. During the audit, the authorities compelled the assessee to reverse the Cenvat credit which was illegal. It reversed the Cenvat credit under protest and thereafter filed an application for refund. When the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export of goods or services, into export oriented undertakings (hereinafter referred to as the user industry) other than those units referred to in clauses (b) to (c); (ii) manufacture or development of software, data entry and conversion, data processing, data analysis, control data management or call center services for export, into Software Technology Park (STP) Unit or a unit in Software Technology Park Complex under the hundred percent export oriented scheme (hereinafter referred to as the user industry); or (iii) the manufacture or development of electronics hardware or electronic hardware and software in an integrated manner for export, into Electronics Hardware Technology Park (EHTP) unit or a unit in an Electronic Hardware Technology Park Complex (EHTP) under the hundred percent export oriented Scheme (hereinafter referred to as the user industry); or Subject to following conditions, namely:- (1) the user industry brings the excisable goods directly from the factory of manufacture or warehouse; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to procure inputs duty free. Such procurement is permissible only subject to fulfillment of the conditions of the exemption Notification. The dispute relates to the legality of clearance of the cenvated inputs (which can include imported inputs, as in the present case) by the appellants without reversing the credit and without payment of duty. Therefore, the said submission is not relevant. 6.8. We hold that the Notification 1/95 is not applicable to the present case and the clearances are governed only by the provisions of Rule 57F. We hold that the inputs cleared as such by the appellants to 100% EOUs cannot be deemed to have been manufactured by the appellants; the supplies (which are deemed exports) cannot be treated on par with export under bond for the purpose of Rule 57F. There is no warrant or justification to extend the instructions dated 31.12.1996 issued by the Ministry/Board to cover supplies to 100% EOU which are treated as deemed exports for certain purposes under EXIM Policy. The appellants are not entitled to remove the inputs without reversal of the credit or payment of equivalent amount of duty." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as well as inputs for its DTA unit. Therefore, duty was paid. Thereafter, with the permission of the authorities as reflected in CT- 3, the inputs were removed from DTA unit to the EHTP unit. Similarly, the capital goods purchased for DTA unit was used, it was not removed as such and when it was removed to EHTP unit again, they have no liability to pay the credit. This aspect has been completely missed by the authority. They proceeded on the assumption that user industry thereby mean EHTP unit was not bringing excisable goods directly from the factory of manufacture or warehouse and therefore they are not eligible for exemption. In the light of the aforesaid Notification which granted exemption, it is very clear that EHTP unit is entitled to exemption of payment of duty. Therefore, the assessee rightly availed the Cenvat credit and then reversed it when those goods were moved to EHTP unit and claimed refund. Therefore, the said question of law is answered in favour of the assessee and against the Revenue. 9. The next question is whether the assessee was not liable to pay any duty when capital goods after it is being used was removed to the EOU unit. 10. Rule 3 Sub-rule 4 of Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: "In the present case the appellant purchased the capital goods in the period between 2003 and 2005 and used them in its factory till they were sold to M/s Harsh International (Khaini) Pvt. Ltd., in June and July, 2007. Thus the capital goods were used for a period of 2 to 4 years. They cannot, therefore, be stated to be sold "as such" capital goods. They were sold as used capital goods." 14. Therefore, it is clear, till the law was amended as on 13.11.2007 in respect of used capital goods, there was no liability to pay duty. In fact, this is evident from the fact that in Cenvat Credit Rules 2004, the proviso was added making the position clear which was not there in the earlier orders. The proviso reads thus: "if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit." This proviso was added by a N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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