2018 (9) TMI 83 - AT - Central Excise

CENVAT credit - benefit of N/N. 22/2003-CE dated 31st March 2003 - inputs cleared as such to a 100% Export Oriented Unit against CT-3 certificate without reversing the CENVAT credit - Held that - There is no doubt that the consignee of the goods is entitled to exemption from all duties on procurement of inputs; however, such exemption can be availed of by the manufacturer of inputs when supplying to 100% export oriented unit. A third party cannot take it upon itself to accord that exemption through availment of CENVAT credit. Contention of appellant of revenue neutrality may apply to goods manufactured by them whereas, if allowed on inputs procured by them, it would be tantamount of exemption from duty to the appellant who, not being a 100% export oriented unit, is not entitled to that privilege. Reversal of credit as prescribed in rule 3(5) of CENVAT Credit Rules, 2004 is inescapable. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Recovery of duty and interest for clearing inputs to a 100% Export Oriented Unit without reversing CENVAT credit.
2. Imposition of penalty for the same.

Analysis:
1. The appellant, M/s Accutech Engineering Pvt Ltd, appealed against the order-in-appeal of the Commissioner of Central Excise & Customs (Appeals), Pune, regarding the recovery of duty and interest amounting to &8377; 5,93,812 for clearing inputs to a 100% Export Oriented Unit without reversing the CENVAT credit, along with a penalty of the same amount.

2. The appellant relied on the decision of the Tribunal in Matrix Laboratories Ltd., where goods were allowed to be cleared without reversing corresponding CENVAT credit, claiming revenue neutrality as the consignee was eligible for duty exemption on input procurement under a specific notification. The appellant also argued that the demand was time-barred since the notice for duty recovery was issued after a significant period from the actual clearance dates.

3. The Authorized Representative countered the appellant's arguments by referring to the impugned order and the decision of the Larger Bench of the Tribunal in Lakshmi Automatic Loom Works Ltd. The representative emphasized that the exemption from duties on input procurement could only be availed by the manufacturer supplying to a 100% export oriented unit, not by a third party through CENVAT credit. The representative highlighted the necessity of reversing credit as per rule 3(5) of CENVAT Credit Rules, 2004.

4. The Tribunal held that while the consignee was entitled to duty exemption on input procurement, this privilege could only be claimed by the manufacturer supplying to a 100% export oriented unit, not by a third party like the appellant. The Tribunal dismissed the appellant's claim of revenue neutrality, stating that reversal of credit was mandatory. The Tribunal differentiated the present case from the decision in Matrix Laboratories Ltd., emphasizing that it did not apply to the current dispute. Consequently, the appeal was dismissed, affirming the duty recovery and penalty imposed by the original authority.