2013 (9) TMI 171 - AT - Central Excise

100% EOU - CENVAT Credit - Notification No. 23/2003 - The appellant availed Cenvat credit of excise duty paid on inputs and capital goods as per the provisions of Cenvat credit Rules, 2004 - The inputs received were the DTA clearances of a 100% EOU The appellant had taken Cenvat credit of the Additional Customs duty component plus education cess of the total duty paid on the inputs received from 100% EOU - Whether the provisions of Rule 3(7)(a) restricting the availment of Cenvat credit as per formula prescribed would be applicable, in respect of inputs received from a 100% EOU when the inputs received from the 100% EOU have suffered duty under S. No. 1 of the table to the Notification No. 23/2003 - Held that - Appellant plea was that the duty on the inputs has been paid under S. No. 1 of the table to the notification No. 23/2003 - they had correctly taken the Cenvat credit of Additional Customs duty component and education and S & H cess - However, if the inputs received from the 100% EOU have suffered duty in terms of S. No. 2 of the table to notification No. 23/2003 - the Cenvat Credit entitlement would be as per the formulas prescribed is Rule 3 (7)(a) - Since no finding had been given on the Appellant s plea that the inputs received from the 100% EOU had suffered duty in terms of S. No. 1 of the table to the notification No.23/03-CE. The Plea taken by assesse required to be examined for which the matter was remanded back - Order was set aside and the matter was remanded to the original adjudication authority for de-novo decision - If the claim of the Appellant was correct their Cenvat credit availment would be Correct and the formula prescribed is Rule 3(7)(a) would not be applicable - The formulas would be applicable only if the inputs received from a 100% EOU, had suffered duty in terms of S. No. 2 of the table to the notification No. 23/2003 Decided in favour of assesse.

Summary

Issues:
1. Interpretation of Rule 3(7)(a) of the Cenvat Credit Rules, 2004 regarding the availment of Cenvat credit in respect of inputs received from a 100% EOU.
2. Applicability of Rule 3(7)(a) when inputs from a 100% EOU have suffered duty under S.No.1 of the table annexed to Notification No. 23/03-CE.
3. Correctness of Cenvat credit availment by the appellant in the given scenario.

Analysis:
1. The appeal dealt with the interpretation of Rule 3(7)(a) of the Cenvat Credit Rules, 2004 concerning the availment of Cenvat credit for inputs received from a 100% EOU. The appellant contended that the provisions of Rule 3(7)(a) should not apply as the inputs received had suffered duty under S.No.1 of the table to Notification No. 23/03-CE. The department, however, argued that the appellant should have restricted the Cenvat credit availment as per the formula in Rule 3(7)(a). The dispute arose from the differing interpretations of the duty payment and Cenvat credit entitlement.

2. The key issue was the applicability of Rule 3(7)(a) when inputs from a 100% EOU have undergone duty under S.No.1 of the notification. The appellant maintained that since the duty was paid under S.No.1, they correctly availed Cenvat credit limited to the Additional Customs duty component and education cess. The authorities, however, did not address this specific contention, leading to uncertainty regarding the correct application of the rule in such circumstances.

3. The judgment highlighted the necessity to ascertain whether the inputs received by the appellant indeed suffered duty under S.No.1 of the table to the notification. The lack of a clear determination on this crucial point necessitated remanding the matter to the original adjudication authority for a fresh decision. Depending on the duty payment category, the Cenvat credit entitlement would vary, emphasizing the importance of accurately identifying the duty classification to determine the correct Cenvat credit availment.

In conclusion, the judgment set aside the impugned order and remanded the case for a thorough examination of the duty payment status of the inputs received from the 100% EOU. The decision on whether the inputs suffered duty under S.No.1 or S.No.2 of the notification would determine the appropriate Cenvat credit availment, clarifying the application of Rule 3(7)(a) in the given context.