2012 (7) TMI 607 - AT - Central Excise

CENVAT Credit in respect of inputs manufactured and cleared from a 100% EOU - Interpretation of the formula and the manner in which the calculations to be made - Commissioner stated that the appellant cannot take the credit of cess relating to Customs duty - Held that - What is required to be done for the purpose of calculating the duty payable by a 100% EOU is to calculate the Customs duty payable (by calculating 25% of the normal rate as per the exemption notification), add CVD and thereafter treat the amount as Excise duty and pay cess on the same, which would be the cess payable on Central Excise duty worked out as per the formula - - the amount of Rs.1,159/- and Rs.580/- being education cess and SHE cess, are the cess paid on Customs duty worked out for the purpose of calculating the total customs duty payable to arrive at the Excise duty payable by the assessee as per the formula, thus the appellant has not taken the credit of Rs.1,159/- and Rs.580/- being the education cess on customs duty - decided in favour of assessee.

Summary

Issues:
Interpretation of CENVAT Credit Rules, 2004 regarding eligibility for credit based on formula X*(1+BCD/400)*(CVD/100) for inputs received from a 100% EOU.

Analysis:
The appellant, engaged in manufacturing P.P. woven bags, faced proceedings for allegedly availing CENVAT Credit wrongly, resulting in a duty demand of Rs.1,64,296/- and a penalty of Rs.2000/-. The dispute centered around the interpretation of the formula for CENVAT Credit eligibility as per Rule 3 of CENVAT Credit Rules, 2004, specifically concerning inputs received from a 100% EOU. The formula X*(1+BCD/400)*(CVD/100) was crucial, with X representing Assessable Value, BCD indicating Basic Customs Duty rate, and CVD representing Additional Customs Duty Rate.

The Tribunal analyzed a sample invoice to resolve the dispute, comparing calculations between the Department and the appellant. The Commissioner held that the appellant could not claim the cess amount related to Customs duty as per a previous Tribunal decision. The appellant contended that while the Commissioner's conclusion was correct, there was an error in identifying the cess paid on Customs duty. The Tribunal agreed with the appellant's argument, emphasizing the correct method of calculating duty payable by a 100% EOU, as established in a previous case involving similar issues.

The Tribunal referenced a previous decision involving Ahmedabad Packaging Industries Ltd., where a similar issue was addressed, leading to the same conclusion. Ultimately, the Tribunal found the appellant's claim regarding education cess on Customs duty admissible, except for specific items, based on the calculations from the sample invoice. The appeals were disposed of accordingly, upholding the appellant's position on the disputed amounts related to education cess on Customs duty.

This judgment clarifies the application of the CENVAT Credit Rules, 2004 in cases involving inputs from a 100% EOU, emphasizing the correct calculation method for duty payable and the eligibility of specific cess amounts based on the formula provided in the rules.