2018 (3) TMI 341 - AT - Central Excise

100% EOU - restriction of time limit for availment of CENVAT credit insofar as the goods lying in stock, or under utilisation, after entitlement to credit was restored to appellant - Held that - Rule 6(6) of CCR 2004 emphatically excludes such export oriented units from various restrictions on availment of CENVAT credit. This follows from the principle that exporters are entitled to refund of duties/taxes discharged on inputs/input services, as well as terminal excise duties, which is operationalised by rule 5 of CENVAT Credit Rules, 2004. Such a rebating is possible, and is given effect to, only by availment of CENVAT credit. There is no dispute over the claim of the appellant that CENVAT credit has been availed only on stocks that were physically available, either in original form or as converted, within the factory, the disallowance of CENVAT credit in the impugned order is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to disallowance of CENVAT credit, eligibility for CENVAT credit on conversion as 100% Export Oriented Unit, time limit for availment of CENVAT credit on inputs in stock.

Analysis:
The appeal challenged the disallowance of CENVAT credit amounting to ?1,20,74,517/- and ?96,77,376/- imposed by the Commissioner of Central Excise, Customs & Service Tax. The appellant, a pharmaceutical products manufacturer, availed CENVAT credit on inputs upon being brought under the 100% Export Oriented Unit scheme. The contention was that goods cleared into the domestic tariff area were no longer exempt, making them eligible for CENVAT credit. The adjudicating authority based its decision on the timing of credit availment, but the appellant argued that no time limit is prescribed in the CENVAT Credit Rules, citing relevant tribunal decisions.

The issue revolved around the time limit for availing CENVAT credit on inputs in stock upon conversion as a 100% Export Oriented Unit. The Tribunal clarified that no such time limit exists in the law governing CENVAT credit. The appellant's eligibility for CENVAT credit was supported by the fact that they availed credit only on inputs used in goods uncleared upon conversion. The Tribunal emphasized that CENVAT credit rules do not restrict availing credit in such circumstances, and export-oriented units are excluded from certain restrictions on credit availment.

Rule 6(6) of the CENVAT Credit Rules specifically excludes export-oriented units from restrictions on credit availment, ensuring their eligibility for CENVAT credit. Exporters are entitled to duty/tax refunds on inputs, operationalized through rule 5 of the rules. The Tribunal found that the appellant's claim for CENVAT credit was valid as it was based on physically available stocks within the factory. Consequently, the disallowance of CENVAT credit and penalties imposed were set aside, and the appeal was allowed.