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M/s Heranba Industries Ltd. Versus Commissioner of C. Ex. & S. Tax, Daman

2016 (5) TMI 1121 - CESTAT AHMEDABAD

Conversion of DTA unit to an 100% EOU - whether CENVAT Credit lying in balance at the time of conversion can be availed and utilized by the 100% EOU? - Held that:- Appellant had availed CENVAT Credit as per CENVAT Credit Rules and it does not prohibit the domestic unit converted into an 100% EOU, availing and utilizing the CENVAT Credit lying in balance. Prior to amendment of Rule 17 of Central Excise Rules, 2002, an 100% EOU was not allowed to pay duty by utilizing the cenvat/modvat credit. Thi .....

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MBER (JUDICIAL) AND MR. P.M. SALEEM, MEMBER (TECHNICAL) For the Appellant: Shri Anil Gidwani, Consultant For the Respondent: Shri Sameer Chitkara, A.R. (Additional Commissioner) ORDER PER: DR. D.M. MISRA This appeal is filed against the OIO No.19/Demand/Daman/ 2007, dt.27.12.2007, passed by the Commissioner of C.Ex. & Customs, Daman, Vapi. 2. Briefly stated, the facts of the case are that the Appellant, an Export Oriented Unit (100% EOU), was earlier a DTA Unit and registered with the Centra .....

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ing to ₹ 66,43,536/- alleging irregular transfer of said credit from their existing DTA unit on conversion into 100% EOU. On adjudication, the said demand was confirmed, penalty of ₹ 7.00 lakh was imposed and recovery of interest was also directed. Hence, the present appeal. 3. The learned Consultant appearing for the Appellant submits that the issue of eligibility of accumulated CENVAT Credit lying unutilized as on the date of conversion of DTA to an 100% EOU, has been settled by th .....

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91) ELT 325 (Bom.). The learned Consultant referring to the judgment in Sun Pharma s case (supra), submitted that the Tribunal taking into consideration the Board s Circular No.77/99-Cus, dt.18.11.1999, and also the provisions of CENVAT Credit Rules, 2004, has held that on conversion of DTA unit into 100% EOU, there is no need to reverse the credit balance lying in the books of account at the time of conversion. 4. Further, he submits that by virtue of amendment to Rule 17 of Central Excise Rule .....

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ition in availing CENVAT Credit by an 100% EOU on conversion of a DTA to 100% EOU under the CENVAT Credit Rules. 5. Per contra, Shri Sameer Chitkara, learned Authorised Representative appearing for the Revenue has submitted that in view of the EXIM Policy, the Appellants are not entitled to the benefit of duty and taxes as on the date of conversion of a DTA unit to an 100% EOU. It is his contention that since an 100% EOU is governed by EXIM Policy, therefore, the CENVAT Credit, lying unutilized .....

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be availed and utilized by the 100% EOU. In our opinion, the issue is no more res-integra and answered by the two leading judgments of the Tribunal. 7. In the case of Sun Pharmaceuticals Indus. Ltd (supra), the Appellant therein was the manufacturer of Pharmaceutical Products and Bulk Drugs and availed CENVAT Credit on various inputs during their operation as DTA unit. On conversion to 100% EOU, the Appellant availed the credit lying in balance amounting to ₹ 27,94,664/-. A Show Cause Not .....

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including Rule 57A to Rule 57U of CER-44 inapplicable to an EOU. CER-44 have been rescinded. There is also no corresponding rule/provision in CCR-01 or CCR-02. CER-01 and CER-02 contain transitional provisions to the effect that any circulars, instructions, orders, trading notices or other orders issued under the CER-44 superseded by CER-01, or such orders etc issued under CER-01 superseded by CER-02, by the Board, and in force on the date the erstwhile rules were rescinded shall, to the extent .....

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their conversion into EOUs have been asked to reverse the Modvat Credit already availed of, on plant and machinery procured by them prior to their conversion into EOUs. The matter has been examined. It is clarified that if the DTA unit has availed of the modvat credit on plant, machinery and equipment and also utilized such credit for payment of duty on goods manufactured and cleared before its conversion into EOU/EHTP/STP, the same is not required to be demanded on its conversion into EOU/EHTP/ .....

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f the transitional provisions contained in Rule 32 of CER, 2001. 8. We find that at the material time the CER or CCR did not contain any provision barring the 100% EOUs from availing cenvat credit or utilizing the same for payment of duty on excisable goods removed to the DTA or for payment of duty on goods exported under claim for rebate. Also there exists no bar for a DTA unit carrying over inputs and the cenvat credit balance in its accounts when it got converted into an EOU. We also observe .....

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efore the penalties imposed on the appellants and on Shri P. Ravi, General Manager are set aside. As regards the merits of the case, we find that there is no rule corresponding to the erstwhile Rule 100H of the Central Excise Rules, 1944. The interpretation that there is no prohibition for 100% E.O.U. to take Cenvat credit appears to be correct. However, in view of Rule 17 of the Central Excise Rules, the duty should be paid by a 100% E.O.U. only through account current. Account current refers t .....

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A. Therefore, the demand of duty only is confirmed. As already stated, the penalties are set aside. However the demand of interest under Section 11AB is upheld. The CBEC has since made good the deficiency in the rules noted by the Tribunal by providing for the EOUs to utilize the cenvat credit. In CCE, Rajkot v. Ashok Iron and Steel Fabricators reported in 2002 (140) E.L.T. 277 (Tri. - L.B.) cited by the Ld. Counsel for the appellants, this Tribunal held as follows :- A manufacturer obtains cred .....

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or, if utilised, has to be paid for. Here, the credit has been validly taken and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. 9. In the absence of provisions requiring the DTA unit to reverse the credit balance at the time of its conversion into an EOU, the above observations of the Tribunal apply. Therefore, the impugned demand and penalties are not sustainab .....

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t the CENVAT Credit lying in balance would be admissible to the converted 100% EOU the Tribunal held as:- 11. The issues to be decided are : (i) The entitlement of EOU to take balance of credit relating to inputs/capital goods lying in the Cenvat account of the DTA on the date of its conversion to EOU; and (ii) Amount of duty to be paid on removal of inputs as such. As regards issue at (i), we find that as held in Order-in-Appeal No. 92/06, Rule 10 of Cenvat Credit Rules, 2004 did not prohibit a .....

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ds for DTA clearances. Therefore GTNs claim in this regard is correct. As regards the second issue, the Commissioner (A) ordered that the appellant was required to reverse the credit originally availed when the inputs were removed as such. We find the order to be in accordance with Rule 3(5) of CCR, 04. The appellant had reversed credit as per the said rule and the demand in this regard was dropped by the original authority in the order passed following the directions in Order-in-Appeal No. 92/ .....

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