2017 (3) TMI 1095 - AT - Central Excise

CENVAT credit - demand on the ground that the appellant-unit removed some to the Export Oriented Unit against permissions issued by the officer having jurisdiction over the EOU between July 2004 and March 2005 for which notice was issued on 4th August 2005 for breach of condition of N/N. 22/2003-CE dated 31st March 2003 - Held that - there is no bar on a manufacturing facility removing inputs as such for any reason that may have motivated such removal. CENVAT Credit Rules, 2004 require that, if CENVAT credit has been availed on such inputs on procurement, duty to that extent must be made good. Admittedly, appellant has done so. Therefore, the transfer from appellant unit to their sister-undertaking has been of duty-paid goods and is a transaction that is clearly outside the purview of Central Excise Act, 1944 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to demand under section 11A of Central Excise, imposition of penalty under section 11AC, breach of condition of notification no. 22/2003-CE, interpretation of duty-free procurement for Export Oriented Units, compliance with CENVAT Credit Rules.

Analysis:
The appeal in this case challenges a demand of &8377; 14,81,940 under section 11A of Central Excise, along with interest and penalty under section 11AC, upheld by the Commissioner of Central Excise (Appeals). The appellant, a manufacturer of 'wireless sets/radios' and 'colour television sets', procured inputs like transistors, integrated circuits, cathode picture tubes, etc., and availed CENVAT credit on the duty paid. The appellant also operates an Export Oriented Unit (EOU) under the Foreign Trade Policy, allowing duty-free import or procurement of goods subject to conditions.

The issue revolves around the alleged removal of inputs by the appellant to the EOU, breaching the condition of notification no. 22/2003-CE. The appellant transferred duty-paid goods to the EOU, availing CENVAT credit as required by the CENVAT Credit Rules. The Tribunal observed that the goods procured by the appellant had borne the incidence of duty, making them duty-paid goods not subject to the conditions of the exemption notification for duty-free procurement by EOUs.

The Tribunal emphasized that the appellant's compliance with the CENVAT Credit Rules by paying duty on procured inputs before transfer to the EOU was sufficient. The transfer of duty-paid goods to a sister-undertaking was deemed outside the purview of the Central Excise Act, 1944. The Tribunal concluded that the demand confirmed in the impugned order lacked legal authority and was set aside, allowing the appeal.

In the analysis, the Tribunal highlighted the significance of distinguishing between duty-paid goods and duty-free procurement for EOUs, emphasizing the compliance with CENVAT Credit Rules as crucial in determining the legality of the transactions. The judgment clarifies the conditions for duty-free procurement and the implications of availing CENVAT credit on duty-paid goods in the context of Central Excise regulations.