2016 (2) TMI 949 - AT - Central Excise

100% EOU - Debonding of EOU - whether the assessee had rightly paid the duty at the time of debonding from hundred percent EOU to EPCG Scheme and had debited an amount of ₹ 28,97,553/- towards payment of duty on indigenous capital goods and raw materials lying in the stock on the date of debonding and partly by way of the challan ER 7 rightly under the provisions of Rule 11(3) of Cenvat Credit Rules, 2004? - Held that - there was no requirement of consideration of the refund claim under the provisions of N/N. 5/2006-C.E. Accordingly I set aside the remand order of the Commissioner (Appeals). I further hold that the appellant is entitled to refund of the amount of ₹ 28,97,553/- which was rightly paid at the time of debonding by debit to Cenvat and the appellant was subsequently made to deposit the same again, in cash and for which a refund claim was filed within the period of 12 months from the date of payment being 24-12-2007. Accordingly the appellant-assessee is entitled to refund of the said amount and I direct the Adjudicating Authority to grant the refund within a period of 45 days - appeal disposed off - decided partly in favor of assessee and partly in favor of Revenue.

Summary

Issues:
- Whether the appellant-assessee rightly paid duty at the time of debonding from EOU to EPCG Scheme and is entitled to a refund?
- Whether the Revenue's appeal against the Commissioner's findings on duty payment is justified?

Analysis:

Issue 1:
The appellant, previously a 100% EOU manufacturing cotton yarn, sought to shift to the EPCG scheme. Upon debonding, the appellant calculated duty liability on imported and indigenous capital goods and raw materials. A portion of the duty was paid via Cenvat credit, and the remainder in cash. After the Revenue's insistence, the appellant deposited the same amount again in cash and applied for a refund. The appellant's claim was contested on grounds of lapsing Cenvat credit, time-barred refund, and availability of Cenvat credit on certain input services. The Commissioner (Appeals) held that the appellant rightly used Cenvat credit for duty payment during debonding. The Commissioner remanded the case for determining the exact refund amount as per Notification No. 5/2006. The Tribunal found that as the Revenue did not dispute the appellant's entitlement to use Cenvat credit, there was no need to consider the refund under Notification 5/2006. The Tribunal ruled in favor of the appellant, directing the Adjudicating Authority to grant the refund with interest within 45 days.

Issue 2:
The Revenue's appeal questioned the remand order of the Commissioner (Appeals) regarding the calculation of the refund amount. However, since the Revenue did not contest the appellant's right to utilize Cenvat credit for duty payment, the Tribunal set aside the remand order and allowed the appeal of the appellant-assessee. The Revenue's appeal was allowed for statistical purposes only.

In conclusion, the Tribunal allowed the appellant's appeal, granting the refund of the duty amount paid during debonding, as the appellant was entitled to use Cenvat credit for payment. The Revenue's appeal was allowed only for statistical purposes, as they did not dispute the appellant's entitlement to utilize Cenvat credit.