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2014 (7) TMI 433 - AT - Central ExciseAvailment of CENVAT Credit - Conversion of DTA Unit into 100% EOU - prior to 6.9.2004, 100% E.O.U. was not eligible for Cenvat credit at all. With effect from 6.9.2004, provisions were made for providing benefit of Cenvat credit to 100% E.O.U. also in respect of the duty paid by them. The question is whether in terms of this provision, the respondent could have taken credit in 2004-05 being balance 50% of credit on capital goods. - Held that - an E.O.U. can take balance 50% of credit of duty paid on capital goods received in the previous fiscal when it was a DTA unit and continued as E.O.U. after conversion - the unit was a DTA till 18.11.2004 and on the date of conversion as a 100% E.O.U., it was eligible for Cenvat credit. Therefore, whatever the credit available to DTA was available to 100% E.O.U. also. Therefore, it can be said that vested right has been created even in respect of 100% E.O.U. since provisions of 100% E.O.U. as well as DTA are same. Assessee relied upon the tribunal decision in the case of GTN Exports Ltd. vs. C.C.E., Coimbatore 2008 (7) TMI 320 - CESTAT CHENNAI and submits that in this case, it was held that an E.O.U. can take balance 50% of credit of duty paid on capital goods received in the previous fiscal when it was a DTA unit and continued as E.O.U. after conversion. - Revenue further points out that in this case, the unit was a DTA till 18.11.2004 and on the date of conversion as a 100% E.O.U., it was eligible for Cenvat credit. Therefore, whatever the credit available to DTA was available to 100% E.O.U. also. Therefore, it can be said that vested right has been created even in respect of 100% E.O.U. since provisions of 100% E.O.U. as well as DTA are same. Even though, the respondent should not have been denied Cenvat credit on the capital goods to the extent of balance 50% of credit, it is not possible to take a different view in view of the statutory provisions. Tribunal being a creation of statute cannot go beyond the statute - Credit denied, however, penalty imposed is set aside - Decided partly in favour of Revenue.
Issues:
1. Eligibility of Cenvat credit on capital goods after conversion to 100% E.O.U. 2. Interpretation of relevant provisions of Foreign Trade Policy and Cenvat Credit Rules. 3. Application of precedents in similar cases. 4. Vested rights in the context of conversion to 100% E.O.U. 5. Justification of penalty imposed. Issue 1: Eligibility of Cenvat credit on capital goods after conversion to 100% E.O.U. The respondent, a DTA unit before conversion to 100% E.O.U., availed 50% of Cenvat credit on duty paid capital goods before conversion, with the remaining 50% taken later. The Revenue objected, leading to an Order-in-Original demanding recovery of Cenvat credit with interest and imposing a penalty. The Commissioner (Appeals) held the respondent was eligible, prompting the Revenue's appeal. Issue 2: Interpretation of relevant provisions of Foreign Trade Policy and Cenvat Credit Rules The AR argued that as per the Foreign Trade Policy, no concession in duties was available for plant and machinery already installed upon conversion to 100% E.O.U. However, if Cenvat credit on capital goods was availed before conversion, it need not be recovered. The AR highlighted that no further concession was available post-conversion. Issue 3: Application of precedents in similar cases The Commissioner (Appeals) relied on precedents, including Hindustan Coco-cola Beverages Pvt. Ltd. and ACE Timez cases, to support the conclusion. However, the Tribunal found these decisions not directly applicable to the present case due to differing circumstances. Issue 4: Vested rights in the context of conversion to 100% E.O.U. The Tribunal analyzed the creation of vested rights concerning Cenvat credit on capital goods. It noted that the respondent was ineligible for credit in the year of conversion, leading to a conclusion that no balance credit was available for subsequent years. The Tribunal emphasized that vested rights must be considered upon conversion to 100% E.O.U. Issue 5: Justification of penalty imposed The Tribunal, while sympathizing with the respondent, acknowledged statutory limitations and allowed the Revenue's appeal. Regarding the penalty, the Tribunal found no justification for its imposition and set it aside. In conclusion, the Tribunal upheld the Revenue's appeal, emphasizing statutory constraints despite sympathizing with the respondent's situation. The penalty imposed was deemed unjustified and subsequently set aside.
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