2008 (11) TMI 169 - AT - Central Excise

100% EOU (Export oriented unit) Cenvat Credit on High Speed Diesel Oil (HSD) - HSD not a specified input in terms of Rule 2(k) of the Cenvat Credit Rules 2004 read with Explanation-I Held that as per the terms of Foreign Trade Policy supply to EOU are treated as deemed export - the EOUs are entitled to avail benefits of Cenvat Credit Scheme consequence to withdrawal of warehousing facility for utilizing the Cenvat credit towards payment of excise duty on DTA clearances - It is an additional facility in the form of reimbursement of terminal excise duty and the general provisions of Cenvat Credit Rules are neither attracted nor applicable for the goods specified under Notification No. 22/03-C.E. dated 31-03-2003. In the appellant s case CT-3 were issued in part for procurement of HSD Oil for generation of electricity for captive consumption as such Cenvat credit is not deniable to the appellant subsequent to withdrawal of warehousing facility

Summary

Issues:
1. Admissibility of Cenvat credit on High Speed Diesel Oil for a 100% EOU under the Cenvat Credit Rules, 2004.
2. Interpretation of relevant notifications and circulars affecting the eligibility of Cenvat credit.
3. Validity of the Commissioner (Appeals) decision in allowing the Cenvat credit.

Analysis:
1. The case revolved around the admissibility of Cenvat credit on High Speed Diesel (HSD) Oil by a 100% Export Oriented Unit (EOU) engaged in manufacturing socks. The EOU availed Cenvat credit on HSD Oil but reversed a portion later. The Revenue contended that HSD was not a specified input under Rule 2(k) of the Cenvat Credit Rules, 2004. A show cause notice was issued proposing disallowance of the credit, which was upheld by the Assistant Commissioner but set aside by the Commissioner (Appeals), leading to the Revenue's appeal.

2. The Revenue argued that the Cenvat Credit Rules, 2004 explicitly excluded the benefit for HSD Oil. They contended that the DGFT Policy Circular was not binding and should not extend the credit. In contrast, the Commissioner (Appeals) based their decision on the DGFT Policy Circular, Notification No. 22/2003-C.E., and 18/2004-C.E., emphasizing that EOUs were entitled to Cenvat credit post withdrawal of warehousing facility for utilizing credit towards excise duty on DTA clearances.

3. The Commissioner (Appeals) justified their decision by citing the DGFT Circular's provisions regarding reimbursement of excise duty on fuels for EOUs. They highlighted that EOUs could claim Cenvat credit under Notification 18/2004-CE if they did not seek reimbursement of Terminal Excise Duty. The Commissioner held that the EOUs, including the respondent, were entitled to Cenvat credit benefits post withdrawal of warehousing facility, specifically for FUEL (HSD). The Tribunal upheld the Commissioner's decision, emphasizing that since the respondent was a 100% EOU, they were entitled to take credit under the relevant notifications, ultimately rejecting the Revenue's appeal.

This detailed analysis of the judgment showcases the intricacies of the legal interpretation and application of rules and notifications concerning the admissibility of Cenvat credit for specific inputs by EOUs, providing a comprehensive understanding of the case's key issues and outcomes.