2015 (10) TMI 2586 - AT - Central Excise

CENVAT credit - 100% EOU - manufacture of Polypropylene Multi Filament Yarn, falling under Chapter 54 of the First Schedule to the Central Excise Tariff Act, 1985 - Rule 3 (7)(a) of the Cenvat Credit Rules, 2004 - Held that - N/N.23/2003-CE dated 31.02.2003 permits the EOU Units for payment of Central Excise Duty equivalent to the special additional duty leviable under Section 3 (5) of the Customs Tariff Act, 1975. The payment of duty under the prescribed rate is subject to fulfilment of condition that the goods supplied to the units in DTA are not exempt from payment of tax levied by the State Government. In the present case, it is a fact on record that the goods were supplied by M/s. Reliance Industries Ltd. a 100% EOU Unit to the appellant on payment of Central Sales Tax (CST) levied and collected under the Sales Tax Statute. Since, supply of goods from M/s. RIL to the appellant has suffered payment of CST, in my opinion, the appellant falls under the purview of Sl.No.1 of Notification dated 31.02.2003. Thus, the formula prescribed in Rule 3 (7) (a) of the Cenvat Credit Rules, containing the stipulation for taking of cenvat credit will have no application and the appellant will be entitled for the full cenvat credit of Central Excise duty paid and reflected by the EOU unit in its invoices. I also find that condition No.2 itemized in the Notification dated 31.02.2003 is subject to observance of the procedures laid down in Clause (a), (d), (e) and (g) of paragraph 6.8 in the Foreign Trade Policy- 2004-09. However, in the present case, since the supplier M/s. Reliance Industries Ltd. has opted for payment of duty under the conditions itemized in clause (h) in the FTP (supra), the case squarely falls under Sl.No.1 in the said Notification, for which the embargo/restriction created in the Rule 3 (7) (a) of the cenvat credit rule will have no application. I am of the considered opinion that the impugned order is not legally sustainable. Therefore, the same is set aside and the appeal is allowed in favour of the appellant.

Summary

Issues:
- Interpretation of Rule 3(7)(a) of the Cenvat Credit Rules, 2004.
- Applicability of Notification No. 23/2003-CE dated 31.02.2003 to the case.
- Compliance with conditions specified in the Notification.
- Entitlement of the appellant to full cenvat credit of Central Excise duty paid by the supplier.

Interpretation of Rule 3(7)(a) of the Cenvat Credit Rules, 2004:
The appellant, engaged in manufacturing Polypropylene Multi Filament Yarn, purchased goods from a 100% export-oriented Undertaking (EOU). The dispute arose when the Department challenged the appellant's claim of cenvat credit on excise duty paid by the supplier, citing non-compliance with Rule 3(7)(a) of the Cenvat Credit Rules, 2004. The appellant argued that if the goods fall under a specific notification, the formula in the rule should not apply, citing a previous tribunal decision. The Tribunal, after considering submissions, held that the appellant was entitled to full cenvat credit as the goods supplied had suffered payment of Central Sales Tax, falling under the purview of the notification, thus overriding the rule's stipulations.

Applicability of Notification No. 23/2003-CE dated 31.02.2003:
The notification allowed EOU units to pay Central Excise Duty equivalent to special additional duty under certain conditions. The Tribunal found that the goods supplied to the appellant had indeed suffered payment of CST, fulfilling a condition of the notification. This led to the conclusion that the appellant fell under the notification's purview, entitling them to full cenvat credit, irrespective of the rule's restrictions.

Compliance with conditions specified in the Notification:
The respondent argued that the supplier had not complied with the conditions of the notification, thus necessitating adherence to Rule 3(7)(a) of the Cenvat Credit Rules, 2004. However, the Tribunal determined that since the goods were supplied with payment of CST, the appellant met the conditions of the notification, rendering the rule inapplicable and entitling the appellant to full cenvat credit.

Entitlement of the appellant to full cenvat credit of Central Excise duty paid by the supplier:
Based on the fulfillment of conditions under the notification and the payment of CST on the supplied goods, the Tribunal concluded that the appellant was indeed entitled to the full cenvat credit of Central Excise duty paid by the EOU supplier. The Tribunal found the impugned order unsustainable and allowed the appeal in favor of the appellant, citing precedent and the specific circumstances of the case.

This detailed analysis of the judgment showcases the Tribunal's thorough consideration of the legal provisions, notifications, and factual circumstances to arrive at a decision favorable to the appellant based on the specific merits of the case.