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2011 (6) TMI 538 - AT - Central ExciseStay applications - denial of transfer of credit - Rule 10 of Cenvat Credit Rules Held that - Under the Cenvat Credit Rules both 100% EOUs as well as DTA units are entitled to avail Cenvat credit of duty paid on inputs/input service and utilise the same for payment of excise duty on excisable goods manufactured and cleared from such units or for payment of service tax on the output service rendered by such units. - The law does not provide for any exclusion or prohibition to carry forward accumulated Cenvat credit when a DTA unit is converted into a EOU or a EOU unit is converted into a DTA unit either in Rule 10 of the Cenvat Credit Rules or under any other provisions of the said Rules. appellant has made out a strong prima facie case against lapsing of the Cenvat credit lying in the books of accounts at the time of de-bonding and recovery thereof. stay applications allowed and waive unconditionally any pre-deposit of the dues
Issues:
Transfer of accumulated Cenvat credit from 100% EOU to DTA unit; Interpretation of Rule 10 of Cenvat Credit Rules, 2004; Prohibition on availing/unutilizing balance of accumulated credit by EOU at conversion into DTA unit; Precedents set by previous Tribunal cases. Transfer of Accumulated Cenvat Credit from 100% EOU to DTA Unit: The case involved two units, Unit-1 and Unit-2, which were 100% EOUs and later converted into DTA units. The issue arose when the department proposed lapsing of accumulated Cenvat credit in their books at the time of de-bonding. The Commissioner held that the accumulated Cenvat credit shall stand lapsed and imposed penalties and interest. The appellants contended that there was no provision prohibiting the transfer of accumulated Cenvat credit from EOU to DTA unit under Rule 10 of the Cenvat Credit Rules, 2004. They argued that since there was no specific prohibition, they were entitled to avail the unutilized balance of credit at the time of de-bonding. Interpretation of Rule 10 of Cenvat Credit Rules, 2004: The appellants argued that the adjudicating authority's interpretation of Rule 10 was incorrect as it did not specifically prohibit the availing or utilization of accumulated credit by an EOU at the time of conversion into a DTA unit. They cited a previous Tribunal case where it was observed that a 100% EOU could utilize the credit for DTA clearances upon conversion, as there was no exclusion in Rule 10. Another case highlighted that a DTA unit converting into an EOU did not need to reverse the credit balance, allowing the EOU to utilize the credit. The absence of provisions requiring reversal indicated that the credit could be carried forward and utilized in both directions. Precedents Set by Previous Tribunal Cases: The Tribunal considered previous cases where it was established that there was no explicit prohibition in the Cenvat Credit Rules against carrying forward accumulated Cenvat credit when converting between EOU and DTA units. The Tribunal noted that both types of units were entitled to avail Cenvat credit for duty paid on inputs/services and utilize it for excise duty payment or service tax. As there was no exclusion or prohibition in the Rules, the Tribunal held that the appellants had a strong prima facie case against lapsing of the Cenvat credit at the time of de-bonding. Consequently, the stay applications were allowed, and any pre-deposit of dues adjudged during the appeals was unconditionally waived. This detailed analysis of the judgment covers the issues of transfer of accumulated Cenvat credit, interpretation of Rule 10, and the precedents set by previous Tribunal cases, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Appellate Tribunal CESTAT, Mumbai.
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