2008 (5) TMI 61 - AT - Central Excise

Commissioner (Appeals) after relying upon the Board s circular dated 18-11-1999 held that Modvat credit availed by DTA unit before its conversion into EOU lying in balance as unutilized would lapse - contention of the appellant is that Circular is in respect of the credit lying unutilized in respect of the capital goods and not in respect of inputs - duty has been paid in respect of goods as the same has been paid from RG 23A Part II. Therefore, the credit cannot be denied

Summary

Issues:
1. Disallowance of credit taken in pursuance to the order-in-Appeal.
2. Interpretation of Board's circular dated 18-11-1999 regarding Modvat credit.
3. Clarification on the lapse of Modvat credit in the case of conversion of DTA unit into EOU.
4. Payment of duty from Cenvat credit availed on inputs.

Analysis:

1. The appellant filed an appeal against the order-in-appeal disallowing credit taken, citing Board's circular No. 77/99-Cus. The appellant, a 100% EOU, cleared goods for export, filed a rebate claim, and was refunded duty by way of Cenvat credit. The Commissioner (Appeals) disallowed the credit availed before conversion into EOU, based on the Board's circular.

2. The appellant argued that the Board's circular pertained to unutilized credit for capital goods, not inputs. The duty was paid from RG 23A Part II, and hence, the credit should not be denied. The revenue contended that clarity was needed on whether duty was paid from the Cenvat credit on inputs.

3. The Board's circular clarified that unutilized Modvat credit for capital goods would lapse upon conversion of DTA unit into EOU. In this case, as duty was paid from Cenvat credit on inputs, and credit was availed in the same account, the impugned order disallowing the credit was set aside, and the appeal was allowed.

4. The judgment highlights the importance of correctly correlating duty payments with the availed credits, especially in cases of conversion between different types of units. The interpretation of circulars and policies plays a crucial role in determining the eligibility of credit claims, emphasizing the need for clear documentation and compliance with regulatory guidelines.