2012 (7) TMI 143 - AT - Central Excise

Cenvat credit assessee converted into a 100% EOU from a DTA unit with effect from 27.12.2006 in terms of Para 6.19(a) of Foreign Trade Policy 2004-09 and they have been granted a license under 100% EOU scheme - unutilized balance of cenvat credit of capital goods and cenvat credit of inputs Held that - EOUs were allowed to pay duty from PLA as well as from Cenvat credit account. The appellant unit was converted into 100%EOU with effect from 27.12.2006 which is after the amendment had taken place

Summary

Issues:
1. Whether unutilized cenvat credit of a DTA unit converting into a 100% EOU can be carried forward.
2. Applicability of Board Circular No. 77/99-Cus dated 18.11.1999.
3. Impact of the amendment allowing EOUs to pay duty from PLA or Cenvat credit account.
4. Relevance of the decision in the case of Sun Pharmaceutical Industries Limited vs. CCE 2010 (251) ELT 312 (Tri. Chennai) on credit of inputs or capital goods.

Issue 1: Unutilized cenvat credit of a DTA unit converting into a 100% EOU
The case involved M/s. Raveshia Colours Pvt. Limited converting into a 100% EOU from a DTA unit. The appellant carried forward unutilized cenvat credit of capital goods and inputs after the conversion. The question was whether this unutilized credit could be carried forward post-conversion.

Analysis: The Tribunal noted that the appellant unit was converted into a 100% EOU after an amendment allowing EOUs to pay duty from PLA or Cenvat credit account. The Commissioner's reliance on a decision regarding credit on inputs or capital goods was deemed appropriate. Therefore, the Tribunal found merit in allowing the appellant to carry forward the unutilized balance of cenvat credit post-conversion.

Issue 2: Applicability of Board Circular No. 77/99-Cus dated 18.11.1999
The Board Circular stated that Modvat credit in balance as unutilized in a DTA unit would lapse upon conversion into EOU. The Revenue contended that this Circular should be followed, while the Commissioner allowed the appellant to carry forward the unutilized credit.

Analysis: The Tribunal found no merit in the Revenue's argument, emphasizing that the relevant Rule was amended to allow EOUs to pay duty from different accounts. As the conversion occurred post-amendment, the Circular's applicability was questioned. The Tribunal upheld the Commissioner's decision, indicating that the Circular did not prevent the appellant from carrying forward the unutilized cenvat credit.

Issue 3: Impact of the amendment allowing EOUs to pay duty from PLA or Cenvat credit account
The amendment post-06.09.2004 allowed EOUs to pay duty from PLA or Cenvat credit account. The conversion of the appellant unit into a 100% EOU occurred after this amendment.

Analysis: The Tribunal considered this amendment crucial in determining the appellant's eligibility to carry forward unutilized cenvat credit. Since the conversion took place after the amendment, the Tribunal found that the appellant was entitled to retain the unutilized balance of cenvat credit post-conversion.

Issue 4: Relevance of the decision in the case of Sun Pharmaceutical Industries Limited vs. CCE
The Tribunal referenced the decision in the case of Sun Pharmaceutical Industries Limited vs. CCE 2010 (251) ELT 312 (Tri. Chennai) to support its stance on allowing the appellant to carry forward unutilized cenvat credit of both inputs and capital goods.

Analysis: The Tribunal found the Commissioner's reliance on the Sun Pharmaceutical case appropriate, emphasizing that the decision applied to both inputs and capital goods. This further supported the Tribunal's conclusion that the appellant could rightfully carry forward the unutilized balance of cenvat credit.

In conclusion, the Tribunal rejected the Revenue's appeal and upheld the Commissioner's decision, allowing the appellant to retain the unutilized cenvat credit of both capital goods and inputs post-conversion into a 100% EOU.