2015 (10) TMI 2272 - AT - Central Excise

Denial of Carry forward of CENVAT Credit - Conversion of DTA to EOU - Held that - It can be seen from the Rule 11(3) that it will apply only in the situation where final products are exempted. Undisputed fact is that the final products manufactured by appellant in EOU and cleared for export are not dutiable but the very same final products when cleared into DTA becomes dutiable hence the provisions of Section 5A of the Central Excise Act 1944 which are sought to be applied by the adjudicating authority and the learned D.R. will not apply as the said provision of Section 5A are in respect of the goods which are fully exempted from payment of duty. Holistic reading of the provisions of Rule 11(3) would indicate that it will apply only in the case when final products are totally exempted. This view has been held by this Tribunal in final order 2015 (10) TMI 844 - CESTAT MUMBAI in the appellant s own case. - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.

Summary

Issues:
Application of Rule 11 of the Cenvat Credit Rules, 2004 for refusing unutilized CENVAT credit carried forward when converting from DTA to EOU.

Analysis:

Issue 1: Application of Rule 11 of the Cenvat Credit Rules, 2004
The case involved a dispute regarding the application of Rule 11 of the Cenvat Credit Rules, 2004 for refusing the unutilized CENVAT credit carried forward when the appellant converted from a DTA unit to an EOU. The appellant had utilized the balance CENVAT credit for discharging duty on goods cleared to DTA from EOU. The Revenue authorities contended that the unutilized CENVAT credit should be reversed upon conversion to EOU. The adjudicating authority confirmed the demands, including interest and penalties, leading to the appeal.

Analysis of Issue 1:
Upon perusal of the records, it was found that the final products manufactured by the appellant in the EOU were exported, while those cleared to DTA attracted Central Excise duty. The provisions of Rule 11(3) of the Cenvat Credit Rules, 2004 were analyzed, which stipulate that the rule applies when final products are exempted. As the final products cleared to DTA were dutiable, the provisions of Section 5A of the Central Excise Act, 1944 did not apply. The Tribunal's previous order in the appellant's case supported this interpretation. The Tribunal held that the Rule 11(3) does not apply when some final products are exempted while others remain dutiable, allowing the utilization of CENVAT credit for dutiable products. The impugned order was set aside based on this reasoning, following authoritative judicial pronouncements.

Conclusion:
The Tribunal found that the impugned order was unsustainable and set it aside, allowing the appeal. The case highlighted the distinction between exempted and dutiable final products in the context of Rule 11 of the Cenvat Credit Rules, 2004, emphasizing the permissibility of utilizing CENVAT credit for dutiable products even when some products are exempted.