2012 (11) TMI 726 - AT - Central Excise

100% EOU - imported inputs duty-free under Notification No. 52/2003-Cus. ibid and also on payment of duty without availing the benefit of this notification - they cleared inputs as such to their sister unit in the Domestic Tariff Area (DTA) - department objected to above utilization of CENVAT credit for payment of duty on the imported inputs cleared as such to the DTA, on the ground that the duty paid on the DTA clearances consisted of elements of customs duties and therefore no CENVAT credit could be utilized for such payment Held that - respondent was a DTA unit prior to December 2007. - In this case, they had procured inputs and capital goods by way of import and also from indigenous sources and had taken CENVAT credit of CVD/Central Excise duty paid thereon. - Respondent paid duty of excise on the imported inputs cleared as such to their sister concern in DTA - respondent was entitled to pay such duty either wholly from PLA or partly from PLA and partly from CENVAT account. There is no law denying this right to a 100% EOU in favor of assessee

Summary

Issues:
Department's appeal against setting aside of two orders-in-original by Commissioner (Appeals) regarding utilization of CENVAT credit for payment of duty on imported inputs cleared to Domestic Tariff Area (DTA) by a 100% Export Oriented Unit (EOU).

Analysis:

Issue 1: Utilization of CENVAT credit for duty payment on DTA clearances
The department contested the utilization of CENVAT credit by the EOU for paying duty on imported inputs cleared to DTA, arguing that the duty paid on DTA clearances included elements of customs duties, making CENVAT credit inapplicable. However, the Commissioner (Appeals) held that duty paid by the EOU for DTA clearances constituted duty of excise, not customs duty. The Commissioner emphasized that the duties of customs were only a measure of the duty of excise to be paid on DTA clearances, as established by previous Tribunal decisions. The EOU had paid duty of excise on DTA clearances under the Central Excise Act, and the utilization of CENVAT credit for such payments was deemed lawful.

Issue 2: Payment of duty by EOU on DTA clearances
The EOU, prior to December 2007, had procured inputs and capital goods through import and indigenous sources, accruing CENVAT credit. The EOU then made part-payment of duty on imported inputs cleared to DTA using the accumulated credit. The department argued that this payment method was irregular and that CENVAT credit could not be used for customs duty payment. However, the Tribunal found that the EOU had paid duty of excise on DTA clearances, calculated under the Central Excise Act, not customs duty. The EOU had the right to pay such duty from PLA or CENVAT account, and the appeals by the department were dismissed as unfounded.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, emphasizing that duty paid by the EOU for DTA clearances was duty of excise, not customs duty, and that the utilization of CENVAT credit for such payments was legitimate. The Tribunal rejected the department's appeal, affirming the EOU's right to pay duty on DTA clearances from PLA or CENVAT account as per the Central Excise Rules.