2013 (9) TMI 209 - AT - Central Excise

Payment of duty by 100% EOU - Interpretation and Calculation of the Formula - Availment of CENVAT credit - Appellant was engaged in the manufacture of P.P. woven bags - Revenue was of the view that on the ground that appellant had availed Cenvat credit wrongly during the Period - The dispute was the interpretation of the formula and the manner in which calculations have to be made - Held that - The claim was correct - The claim of the appellant that excepting the above two items under the head of Education Cess the remaining amounts were held admissible as per the calculations made in respect of the sample invoice - What was required to be done for the purpose of calculating duty payable by a 100% EOU was 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. While the conclusion drawn by the Commissioner was correct, the error had been committed in identifying the Cess paid on customs duty - in the case the amount 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 - appellant had not taken the credit being the Education Cess on customs duty Decided in favour of Assessee.

Summary

Issues:
Interpretation of the formula for availing Cenvat credit based on inputs from a 100% EOU.

Analysis:
The case involved a dispute regarding the interpretation of the formula for availing Cenvat credit under sub-rule (7) of Rule 3 of Cenvat Credit Rules, 2004, concerning inputs received from a 100% EOU. The formula specified the calculation method for determining the eligibility of Cenvat credit based on the assessable value, Basic Customs Duty (BCD) rate, and Additional Customs Duty (CVD) rate. The disagreement centered around the correct application and calculation of the formula for availing the credit.

The Tribunal considered a sample invoice to analyze the rival contentions presented by both the department and the appellant. The tables presented by both parties, labeled as Table A, Table B, and Table C, were examined to determine the correct calculation method and eligibility of Cenvat credit. The tables contained details such as assessable value, BCD, CVD, and various cess amounts paid, forming the basis for the dispute resolution.

The Commissioner, in the impugned order, relied on a previous Tribunal decision and concluded that the appellant was not eligible to claim certain Cess amounts related to customs duty. However, the appellant's representative argued that the Cess amounts were incorrectly identified, emphasizing that the appellant had not claimed Cess on customs duty. The representative pointed out discrepancies in the Commissioner's findings and presented a detailed breakdown of the invoice components to support the appellant's claim.

Upon review, the Tribunal agreed with the appellant's submission, acknowledging that the Education Cess and SHE Cess amounts were paid on customs duty to calculate the total customs duty payable. The Tribunal clarified that the correct approach for calculating duty payable by a 100% EOU involved determining the customs duty, adding CVD, treating the total as excise duty, and then paying Cess on that amount. Citing a previous decision, the Tribunal upheld the appellant's claim, except for the specific Education Cess amounts, and deemed the remaining calculations admissible as per the sample invoice.

In conclusion, the Tribunal disposed of the appeals in favor of the appellant, emphasizing the correct interpretation and application of the formula for availing Cenvat credit related to inputs received from a 100% EOU. The judgment highlighted the importance of accurate calculation methods and proper identification of Cess amounts to determine the eligibility of credit under the Cenvat Credit Rules, 2004.