2010 (2) TMI 1047 - AT - Central Excise

Summary

Issues:
Whether a buyer of goods from a 100% EOU is required to pay Customs duty when Excise duty has been collected from the buyer by that 100% EOU.

Analysis:
The appeal in this case revolves around the question of whether a buyer of goods from a 100% EOU is obligated to pay Customs duty when Excise duty has already been collected from the buyer by the EOU. The appellant contested the order passed by the Commissioner, which denied Cenvat credit and directed the reversal of credit under Rule 14 of Cenvat Credit Rules, 2004. The appellant argued that they were entitled to Cenvat credit as Excise duty had been paid by the seller, who was a 100% EOU. The appellant relied on specific invoices showing payment of Central Excise duty and Education Cess by the EOU. The appellant contended that payment of Central Excise duty entitled them to Cenvat credit, and any questions regarding duty payment should be directed to the EOU seller.

The respondent, however, opposed the appellant's submission, arguing that when a 100% EOU sells goods in the DTA, the buyer is required to pay Customs duty as per EPCG License conditions and Notification No. 55/03 read with Cenvat Credit Rules. The respondent maintained that the duty paid by the seller was basic customs duty, which did not entitle the appellant to claim credit. The respondent supported the order of the first appeal, emphasizing the buyer's obligation to pay Customs duty.

Upon careful consideration and examination of the relevant legal provisions, the Tribunal observed that excisable goods manufactured in India by a 100% EOU are liable to excise duty under the proviso to Section 3 of the Central Excise Act, 1944. The Tribunal noted that the legislature intended to levy excise duty on 100% EOUs for DTA clearances, ensuring that the duty imposed is not less than the customs duty payable on similar imported goods. Consequently, the Tribunal found that the denial of Cenvat credit by the lower authorities was unjustified, given the payment of Central Excise duty by the EOU seller.

In light of the legal position and the genuine hardship that demanding a pre-deposit would cause to the appellant, the Tribunal waived the pre-deposit requirement during the appeal's pendency and stayed the realization of the demand for the specified period. The Tribunal's decision highlighted the legislative intent behind imposing excise duty on 100% EOUs for DTA clearances and upheld the appellant's entitlement to Cenvat credit based on the payment of Central Excise duty by the EOU seller.