2014 (2) TMI 1203 - AT - Central Excise

Denial of CENVAT Credit - credit of the CVD and used it for payment of duty on the repaired transformers cleared from the appellant s factory - Held that - Admittedly, the duty was paid by the appellant on the full value of the transformer including the value of the damaged parts. It is not the case of the Revenue that parts were imported separately and duty was paid on the separate parts. It is a complete transformer, which was imported on payment of duty and it is the complete transformer which was subsequently converted into a new transformer, which was cleared on payment of duty. As per the provisions of Rule 3 (1) (vi) of CENVAT Rules 2001, an assessee is entitled to take the CENVAT credit of the additional duty on customs leviable on the goods imported and paid under Section 3 of the Customs Tariff Act, 1975. The Bill of Entry filed by the appellant clearly reveals the payment of CVD on the complete transformer. Merely because on account of under-going through sea-voyage from India to Holland and back, some of the parts might have got damaged requiring re-attaching, re-conditioning/repair cannot be made a ground for denial of the duty paid on the said parts. Even at the cost of repetition, I would like to observe that it is not the parts, which were imported by the appellant but the complete transform and at the time of payment of CVD on the complete transformer, including the damaged parts, the customs authorities did not object to payment of duty on the damaged parts. As such, I find no justification for denial of the credit. - Decided in favour of assessee.

Summary

Issues:
Recovery of CENVAT credit for damaged transformers exported for testing without payment of duty, applicability of Rule 16 of Central Excise Rules, 2002, limitation period for issuing Show Cause Notices.

Analysis:
The appellant exported 11 transformers without duty payment for testing, with four being damaged and re-imported after payment of duty. Revenue sought to recover CENVAT credit, claiming damaged parts weren't used in final products. Two Show Cause Notices were issued, but the first was held time-barred by Commissioner (Appeals). The denial of credit for the second transformer was based on damaged parts not being considered cenvatable inputs. Commissioner opined Rule 16 wasn't applicable due to the export purpose. The appeal challenged these decisions.

The tribunal found no factual dispute regarding duty payment on the complete transformer, including damaged parts, upon re-import. Revenue argued damaged parts weren't inputs for the new transformer, thus credit shouldn't apply. However, the tribunal disagreed, citing Rule 3(1)(vi) of CENVAT Rules 2001 allowing credit for additional duty on imported goods. The Bill of Entry confirmed CVD payment on the complete transformer, and damage during transport shouldn't negate duty payment on those parts. The tribunal emphasized the importation of the entire transformer and the lack of objection by customs authorities to duty payment on damaged parts.

Additionally, the tribunal noted the credit claim in September 2003 predated the Show Cause Notices issued in March 2007, rendering them time-barred. Consequently, the tribunal set aside the previous order, ruling in favor of the appellant and granting consequential relief.