2020 (1) TMI 674 - AT - Central Excise

Whether the Cenvat Credit of duty paid by a 100% EOU which according to the department is customs duty is admissible to the receiver? - HELD THAT - A plain reading of N/N. 23/2003-CE dated 31/03/2003 reveals that when 100% EOU has paid Excise duty under Section 3 ibid r/w Sr. no. 2 of the said notification the admissible quantum of Cenvat Credit be calculated in accordance with the formula prescribed under Rule 3(7) of Cenvat Credit Rules 2004 whereas Section 3 of Central Excise Act provides that the duty charged by an EOU is a duty of Excise charged by 100% EOU and the amount of duty charged is one single amount and it does not contain any bifurcation like DCD, CVD etc. In the instant Appeal it is not the case of the Revenue that the supplier i.e.100% EOU has availed the exemption under Serial No. 2 of Notification No. 23/2003 their only case is that the EOU supplier has availed benefit of exemption under serial no. 1 of the notification - It is settled position that Rule 3(7) ibid comes into operation only if the benefit has been availed under serial no. 2 of the aforesaid notification as the application of the said rule is conditional upon availing such exemption. In none of the authorities produce by Revenue it has been held that the aforesaid notification that Rule 3(7) will be applicable irrespective of the fact whether the supplier has availed exemption under serial no. 2 or not therefore the authority cited by Revenue are not applicable on the facts of the present case - The Appellants are justified in taking credit of the amount of duty in issue. Extended period of limitation - HELD THAT - The period involved in the matter is from April 2009 to April 2010 whereas the show cause notice was issued on 28/04/2014. The credit availed by the Appellant was being reflected in their credit account and therefore no suppression or malafide with intent to effect duty can be attributed to the Appellants - the demand is held to be time barred also. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Admissibility of Cenvat Credit for duty paid by a 100% EOU, interpretation of Rule 3(7)(a) of Cenvat Credit Rules, 2004, applicability of Notification No. 23/2003-CE, limitation period for demand of Cenvat Credit.

Analysis:

Admissibility of Cenvat Credit:
The case revolved around the admissibility of Cenvat Credit for duty paid by a 100% EOU, specifically whether the Basic Customs duty (BCD) paid by the supplier was eligible for credit by the receiver. The Appellant contended that the duty paid by the EOU supplier, M/s. BHL, should be treated as excise duty, allowing for the credit of both BCD and Additional Customs Duty. The Appellant argued that since M/s. BHL did not claim benefits under a specific notification, the proviso of Rule 3(7)(a) of Cenvat Credit Rules, 2004, restricting credit, did not apply. On the other hand, the Revenue contended that as the duty paid was Customs duty, the credit for BCD was not admissible. The Appellant's argument was supported by judicial decisions, emphasizing the treatment of the duty paid by EOU as excise duty, allowing for the credit of the entire duty amount.

Interpretation of Rule 3(7)(a) of Cenvat Credit Rules, 2004:
The interpretation of Rule 3(7)(a) of Cenvat Credit Rules, 2004 was crucial in determining the admissibility of the Cenvat Credit. The Appellant argued that this rule was not applicable in their case as M/s. BHL did not claim benefits under a specific notification, thus allowing for the credit of BCD. Conversely, the Revenue relied on this rule to assert that credit for BCD was not admissible since the duty paid was Customs duty. The Tribunal analyzed the provisions of the rule in light of the specific circumstances of the case to determine its applicability.

Applicability of Notification No. 23/2003-CE:
The Tribunal examined the provisions of Notification No. 23/2003-CE to ascertain its impact on the admissibility of Cenvat Credit in the present case. It was noted that the Revenue's argument was not based on M/s. BHL availing exemption under a specific serial number of the notification but rather on a different aspect. The Tribunal clarified that Rule 3(7) of Cenvat Credit Rules, 2004 would be triggered only if the exemption under a particular serial number of the notification was availed. Since this condition was not met in the case, the Tribunal found that the authorities cited by the Revenue were not applicable, supporting the Appellant's position on the issue.

Limitation Period for Demand of Cenvat Credit:
The Tribunal also addressed the issue of the limitation period for the demand of Cenvat Credit. The Appellant argued that the demand pertained to a period from April 2009 to April 2010, while the show cause notice was issued in April 2014, beyond the statutory limitation period. The Tribunal agreed with the Appellant, noting that the credit was reflected in their account, and no suppression or malafide intent was evident. Consequently, the Tribunal held the demand to be time-barred, providing additional support for the Appellant's case.

In conclusion, the Tribunal allowed the Appeal filed by the Appellants, granting them consequential relief, and pronounced the order in open Court on 16.01.2020.