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2008 (7) TMI 320 - AT - Central ExciseConversion from DTA to EOU - Duty paid on inputs received indigenous were taken as credit refund was claimed u/r 5 of CCR, of the unutilized credit when goods were exported held that refund is admissible as EOU can claim such refund u/not. 5/06 there is no bar on EOU taking credit of duty and utilize the credit for payment of duty on DTA clearances or for export there is no bar on EOU for availment of balance 50% credit on Capital goods received in previous fiscal when it was DTA
Issues Involved:
1. Eligibility of EOUs to avail Cenvat credit on inputs used for manufacturing exempted goods. 2. Entitlement to refund claims under Rule 5 of Cenvat Credit Rules, 2004. 3. Legitimacy of re-credit of previously denied rebate claims. 4. Eligibility to the balance 50% credit of capital goods received by DTA units prior to conversion to EOU. 5. Admissibility of refund claims for accumulated credit due to exports. Detailed Analysis: 1. Eligibility of EOUs to Avail Cenvat Credit on Inputs Used for Manufacturing Exempted Goods: The appellants, GTN and Jubiliant, converted from DTA units to EOUs and continued to avail Cenvat credit on inputs used for manufacturing goods, which were exempted under Notification No. 24/03 dated 31-3-03. The authorities initially rejected their claims, citing that the goods were exempted and EOUs were not entitled to take such credit. However, the Tribunal found that Rule 6(1) of CCR, which denies Cenvat credit on inputs used in the manufacture of exempted goods, does not apply to goods cleared for export under bond as per Rule 6(6)(v) of CCR. Therefore, EOUs were entitled to avail Cenvat credit on inputs during the material period. 2. Entitlement to Refund Claims under Rule 5 of Cenvat Credit Rules, 2004: The appellants claimed refunds for accumulated credit under Rule 5 of CCR, 2004, which were initially denied by the authorities. The Tribunal noted that Rule 5 provides for refund of credit accumulated due to the export of finished goods without payment of duty. The relevant case laws, including Medispan Ltd. v. CCE and Norris Medicines Ltd. v. CCE, supported the position that Cenvat credit on inputs used for export goods could be refunded. Thus, the Tribunal concluded that the refund claims were admissible. 3. Legitimacy of Re-credit of Previously Denied Rebate Claims: GTN took re-credit of Rs. 22,36,502/- after their rebate claims were rejected. The authorities demanded the amount back along with interest and penalties, arguing that GTN did not maintain separate accounts as required under Rule 6(1) to 6(4) of CCR, 2004. The Tribunal, however, held that GTN was eligible for the re-credit as the amount represented Cenvat credit on inputs used for manufacturing goods exported by the EOU. 4. Eligibility to the Balance 50% Credit of Capital Goods Received by DTA Units Prior to Conversion to EOU: Jubiliant availed the balance 50% of the capital goods credit after converting to an EOU. The authorities initially denied this credit, arguing that Rule 10 of CCR did not cover the conversion of a DTA to an EOU. The Tribunal found no statutory provision barring an EOU from availing the balance credit of capital goods still installed in the EOU, thus ruling in favor of the appellants. 5. Admissibility of Refund Claims for Accumulated Credit Due to Exports: The Tribunal found that there was no prohibition in the relevant rules against EOUs claiming refunds for accumulated Cenvat credit. Notifications and Circulars, such as Notification No. 5/2006-C.E. (N.T.) and Circular No. 799/32/2004-CX, supported the entitlement of EOUs to claim such refunds. The Tribunal cited several precedents, including Tata Tea Limited v. CCE and ANZ International v. CC, which upheld the refund of Cenvat credit for EOUs. Consequently, the Tribunal allowed the refund claims for the appellants. Conclusion: The Tribunal allowed all the appeals, confirming that EOUs were entitled to avail Cenvat credit on inputs, claim refunds for accumulated credit due to exports, and take re-credit of previously denied rebate claims. The Tribunal emphasized the need for a liberal approach in interpreting rules related to export benefits to align with the government's policy of encouraging exports.
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