2015 (10) TMI 287 - AT - Central Excise

Duty demand - Unutilized CENVAT Credit lapsed - conversion from DTA unit to 100% EOU unit - Interest u/s 11AB and penalty u/s 11AC - Held that - Board Circular no. 77/99-Cus quoted does not elaborate under what provision the unutilised credit will stand lapsed. In any case, the said circular was issued when Rule 100H under old Central Excise Act, 1944 (sic) were existing and at that point of time 100% EOU were outside the scheme of modvat/Cenvat Credit, which is not so after the CENVAT Credit Rules, 2004 have come into existence. The present case is pertaining to the period after 2004. We have also seen the Tribunal s judgment in the case of Indira Gandhi Mahila Sahakari Soot Girni Ltd. (2011 (10) TMI 206 - CESTAT, MUMBAI), the facts of that case are entirely different and that case pertain to the time when the old rules were in existence, and therefore not applicable to the present facts of the case. On limitation also we find the appellant has strong case as when unit got converted in EOU all details of unutilised credit etc. were made known to the department and revenue after five years cannot allege that there was wilful mis-statement or suppression of fact. - Decided in favour of assessee.

Summary

Issues:
1. Lapsing of unutilised Cenvat credit on conversion from DTA unit to 100% EOU.
2. Validity of invoking the extended period of limitation for recovery of unutilised credit.
3. Interpretation of Board Circular no. 77/99-Cus regarding lapsing of credit.
4. Applicability of case laws in support of both appellant and respondent's contentions.

Analysis:
1. The appellant, a DTA unit converted to a 100% EOU, had unutilised Cenvat credit. The Revenue argued that the credit would lapse based on Circular No. 77/99-Cus. The appellant challenged this, citing that CENVAT Credit Rules do not provide for lapsing. They argued that 100% EOUs can avail Cenvat credit and should not be denied unutilised credit. The appellant also contested the extended period of limitation invoked by the Revenue, stating that all details were known at conversion, citing relevant case laws in support.

2. The Revenue reiterated findings that credit lapses post-conversion, referring to Indira Gandhi Mahila Sahakari Soot Girni Ltd. case and supporting case laws for invoking extended limitation period. The Tribunal referred to past judgments like Sandoz Pvt. Ltd. and Matrix Laboratories Ltd., upholding the transfer of credit from DTA to 100% EOU. They emphasized that no specific prohibition exists for such transfers under Rule 10 of Cenvat Credit Rules, allowing for the transfer of credit.

3. The Tribunal found no merit in Revenue's contention, noting Circular no. 77/99-Cus lacked clarity on the provision for lapsing unutilised credit. They highlighted the change in rules post-2004, where 100% EOUs could avail Cenvat credit. The Tribunal distinguished the Indira Gandhi Mahila Sahakari Soot Girni Ltd. case, stating it was under old rules and not applicable. On limitation, the Tribunal found in favor of the appellant, noting that all details were disclosed during conversion, and there was no wilful misstatement or suppression of facts.

4. Ultimately, the Tribunal allowed the appeal on both merits and limitation, emphasizing the entitlement of the appellant to transfer unutilised credit from DTA to 100% EOU under the Cenvat Credit Rules, 2004. The judgment clarified the applicability of rules post-2004 and distinguished past cases under old rules, leading to a favorable decision for the appellant.