2017 (5) TMI 1338 - AT - Central Excise

100% EOU - CENVAT credit - whether the respondent was correct in utilising the CENVAT credit balance available with him for discharge of applicable duties on the inputs cleared from their premises or otherwise? - Held that - respondents are 100% EOU; procured inputs indigenously as well as imported the same by claiming the benefit of N/N. 52/2003-Cus and N/N. 22/2003-CE which enables them to import the goods without payment of duty; they have sought the permissions of the authorities to clear the inputs which they are unable to consume in 100% EOU; authorities granted permission to respondents for clearance of such inputs to DTA on discharge of applicable duties; the applicable duties have been discharged by the respondent by debit in the CENVAT account considering them as Central Excise duty. Appeal rejected - decided against Revenue.

Summary

Issues:
- Whether the respondent correctly utilized the CENVAT credit balance for discharging applicable duties on cleared inputs from their premises.

Analysis:
1. Background: The appeals were filed by the Revenue against the Orders-in-Appeal, contending that the respondent, a 100% EOU, cleared inputs procured duty-free by debiting the duties in CENVAT account. The Revenue alleged that the respondent did not pay applicable duties on imported and indigenously procured materials, leading to show-cause notices demanding duty amounts under Section 11A(1) of the Central Excise Act, 1944.

2. Revenue's Arguments: The Revenue argued that duty-free imports cleared into DTA require duty payment in cash, not through CENVAT credit. They cited Rule 3(4) of Central Excise Rules 2004 to support their position that CENVAT credit can only be used for final product duty payment equal to the credit taken on inputs. The Revenue emphasized that duty on imported raw materials should be paid as Customs duty, not Central Excise duty.

3. Respondent's Defense: The respondent contended that permissions granted indicated clearances should be on payment of applicable duties, which were debited in the CENVAT account as Central Excise duty. They argued that the show-cause notice only demanded duty already debited in CENVAT account and not Customs duty. The respondent highlighted that the demands were time-barred and relied on the Tribunal's judgment in the case of Matrix Laboratories.

4. Judgment: The Member (Judicial) analyzed the issue and undisputed facts, noting that the respondent sought permissions to clear inputs to DTA after being unable to consume them in the EOU. The first appellate authority set aside the demands, emphasizing that the show-cause notice invoked Central Excise duty, allowing CENVAT credit utilization for duty discharge. The Member (Judicial) upheld this decision, citing the Tribunal's precedent in Matrix Laboratories case, rejecting the Revenue's reliance on a stay order and confirming the rejection of the appeals based on established legal principles.

5. Conclusion: The appeals were dismissed based on the Tribunal's precedent, affirming the respondent's correct utilization of CENVAT credit for discharging applicable duties on cleared inputs, in compliance with the law and settled legal interpretations.

(Order pronounced on 12/05/2017)