2017 (1) TMI 796 - AT - Central Excise

100% EOU - Refund claim - denial on the ground that the credit was held to be availed in contravention of Rule 6(1) read with 6(4) of CCR, 2004 - Held that - due to non appearance by the appellant before the Court below, the issue has not been examined with respect to the availability of Cenvat credit in terms of rule 6(6) of the Cenvat Credit Rules, 2004. Accordingly, in interest of Justice we remand the matter to the adjudicating authority, who shall examine the issue as regards both availability and impediment to avail Cenvat credit with respect to the provisions of Cenvat Credit Rules, particularly Rule 6(6) of the Cenvat Credit Rules - appeal allowed by way of remand.

Summary

Issues:
1. Disallowance of Cenvat credit upheld by Commissioner (Appeals).
2. Applicability of Rule 6(6) of the Cenvat Credit Rules, 2004.
3. Non-appearance of the appellant before the Court below.

Analysis:
1. The appellant, a 100% Export Oriented Unit (EOU), filed an appeal against the disallowance of Cenvat credit by the Commissioner (Appeals). The appellant had applied for a refund under Rule 5 of Cenvat Credit Rules, 2004, for accumulated Cenvat credit used in the manufacture of goods cleared for export. The Revenue contended that since the appellant cleared goods without duty payment, they were not entitled to Cenvat credit. The appellant did not contest the show cause notice (SCN), leading to the rejection of the refund claim. The Commissioner (Appeals) upheld this decision. The appellant's counsel mentioned their non-appearance due to proceedings before the settlement commission. The settlement commission observed that Rule 6(1) exemptions apply to 100% EOUs, allowing Cenvat credit on input services utilized for exported goods.

2. The settlement commission clarified that while duty was demanded on various issues, the denial of Cenvat credit was under Rule 6(1) of the Cenvat Credit Rules. The appellant had availed Cenvat credit on inputs, capital goods, and input services, part of which was used for duty foregone. The commission noted that exemptions for duty applied to inputs and capital goods for 100% EOUs but not for services. It emphasized that Cenvat credit on service tax paid for input services used in proportion to exported goods was valid. The commission also referred to the Foreign Trade Policy provisions and Rule 5 of Cenvat Credit Rules for refund of accumulated credit on duty-free exports.

3. The Tribunal found the issue centered on the availability of Cenvat credit and the non-examination of Rule 6(6) of the Cenvat Credit Rules due to the appellant's non-appearance before the lower court. To ensure justice, the Tribunal allowed the appeal by remand, directing the adjudicating authority to examine the availability and impediments to Cenvat credit under Rule 6(6) within 45 days. The appellant was instructed to appear before the authority with necessary documents within 20 days. If entitled, the refund was to be disbursed within 30 days. The appeal was allowed by remand with specific directions, and a miscellaneous application for early hearing was disposed of accordingly.