2018 (2) TMI 383 - AT - Central Excise

CENVAT credit - clearance to 100% EOU - It appeared to Revenue that under Sub Rule (5) of Rule 3 of CCR, 2004, appellants were required to reverse the said Cenvat Credit of ₹ 11,88,931/- on clearance of DMO to 100% EOU - Held that - during the relevant period when Rule 57F was on Statute there was no provision equivalent to Caluse (ii) of Sub Rule (6) of Rule 6 of CCR 2004 - if the Cenvat Credit is availed on inputs and if the same are cleared to 100% EOU as provided under Sub Rule (6) of Rule 6 of CCR 2004, Cenvat Credit of duty paid on such inputs cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Reversal of Cenvat Credit on clearance of goods to 100% EOU
- Applicability of Cenvat Credit Rules, 2004
- Interpretation of Rule 57F of Central Excise Rules, 1944

Analysis:

The appeal arose from an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals-I), Meerut, concerning the reversal of Cenvat Credit on the clearance of De-Mentholised Oil (DMO) to a 100% Export Oriented Unit (EOU). The appellants, engaged in manufacturing Mentha Products, including DMO, availed Cenvat Credit and procured DMO from other manufacturers. The Revenue contended that the appellants were required to reverse the Cenvat Credit on the clearance of DMO to the 100% EOU. The Commissioner (Appeals) relied on a Larger Bench decision, holding that inputs could not be cleared without the reversal of Cenvat Credit. The appellant challenged this decision before the Tribunal.

During the hearing, the appellant argued that the goods cleared to the 100% EOU should be treated as exports. The Revenue relied on the Larger Bench's decision in a similar case. After considering the contentions, the Tribunal examined the provisions of Cenvat Credit Rules, 2004. It noted that under Clause (ii) of Sub Rule (6) of Rule 6 of Cenvat Credit Rules, provisions of Sub Rule (1) of Rule 6 would not be applicable if excisable goods are removed without duty payment to a 100% EOU. The Tribunal observed that during the relevant period, there was no provision equivalent to Clause (ii) of Sub Rule (6) in Rule 6. Therefore, the ruling by the Larger Bench was deemed not applicable in the present case. The Tribunal held that if Cenvat Credit is availed on inputs and cleared to a 100% EOU as per Rule 6 of Cenvat Credit Rules, the credit of duty paid on such inputs cannot be denied. Consequently, the appeal was allowed, and the impugned Order-in-Appeal was set aside.