2013 (3) TMI 185 - AT - Central Excise

Cenvat Credit denied as availed on the basis of EX-BOND Bill of Entry filed by their another unit at the time of de-bonding from EOU Scheme - Held that - Physical removal of inputs and capital goods was not possible and never took place since the factory remains where it was and further it was always part of the premises where domestic unit was located and did not even have separate registration certificate. In the absence of separate registration certificate, the question of procedural requirements of issuing invoices for transferring the goods does not arise. Moreover, when credit was taken by DTA unit of the Respondents, the capital goods and inputs of 100% EOU ceased to be treated as part of 100% EOU and manufacturing operations of 100% EOU were treated as that of DTA unit and therefore it can be theoretically said that inputs and capital goods were transferred to the DTA unit. In view of the fact that 100% EOU and the DTA units were located in the same area and the fact that there was not even a separate registration to show that EOU was considered to be a division of the DTA and once the duty on capital goods and inputs were paid, it can be said that the same stood transferred to the DTA unit - there is nothing wrong in the impugned order taking a view that the credit has been taken correctly in the first instance and therefore question of demanding interest does not arise - in favour of assessee.

Summary

Issues:
Wrong availment of Cenvat Credit during de-bonding from EOU Scheme, demand of interest and penalty, interpretation of Cenvat Credit Rules, 2004 regarding credit eligibility, determination of correct timing for credit availment post-payment of dues, consideration of physical removal of goods for credit eligibility, distinction between 100% EOU and DTA units, relevance of separate registration certificate for credit transfer, applicability of procedural requirements for goods transfer, determination of correct unit for credit transfer.

Analysis:
1. The case involved the incorrect availment of Cenvat Credit by the assessee during the de-bonding process from the EOU Scheme. The Internal Audit observed that the assessee had wrongly availed credit based on an EX-BOND Bill of Entry filed by another unit, leading to the demand of Rs. 48,54,662 and Rs. 3,80,644. The issue raised was the validity of the credit availment without the actual transfer or merger of material between the units.

2. Proceedings were initiated to demand interest and impose a penalty on the grounds of the wrongful credit availment. The Commissioner (A) held that the credit was rightfully taken after the payment of dues, dismissing the need for credit reversal and rejecting the imposition of interest and penalty. The Revenue appealed against this decision, leading to a further review of the case.

3. The argument presented was that the 100% EOU only transitioned into a domestic unit upon the issuance of the debonding certificate by the Development Commissioner. The physical transfer of goods did not occur, and the credit was deemed incorrect as per the Cenvat Credit Rules, 2004, which require the actual receipt of inputs and capital goods for credit availment.

4. The Respondent contended that upon complete payment of dues, the EOU effectively operated as a domestic unit, even before the debonding certificate issuance. The absence of a separate registration certificate for the EOU indicated its integration with the DTA unit, justifying the credit availment. The argument emphasized the notional transfer of goods due to the shared premises and operational unity between the units.

5. The final decision upheld the view that the credit was correctly taken, considering the operational integration of the EOU and DTA units without a separate registration. The physical transfer was deemed unnecessary due to the units' proximity and shared operations, leading to the conclusion that the credit was rightfully availed. The appeal by the Revenue was rejected based on this analysis.