2021 (9) TMI 35 - AT - Central Excise

MODVAT Credit - inputs received and thereafter cleared them as such to a 100% EOU without reversing the Modvat credit availed - applicability of Exemption N/N. 1/1995-CE dt. 04.01.1995 - HELD THAT - Hon ble High Court of Karnataka in the case of THE COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II VERSUS M/S SOLECTRON CENTUM ELECTRONICS LTD. 2014 (10) TMI 596 - KARNATAKA HIGH COURT and the ratio has been followed by this Bench in the case of M/S. EMERSON PROCESS MANAGEMENT CHENNAI LTD. VERSUS CCE, CHENNAI 2018 (3) TMI 252 - CESTAT CHENNAI has held that the very same goods, which are cleared by the appellant to the EOU or towards supply of ICB, when such goods are cleared to the DTA, the department has accepted the payment of duty made by the appellant on the transaction value and on such DTA clearances have not demanded debit of the corresponding amount of CENVAT credit availed in respect of those good. The appellant is entitled to avail modvat credit / cenvat credit on inputs and entitled to clear the same without payment of duty to 100% EOU without reversing the input credit so availed - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether a manufacturer can avail Modvat credit on inputs cleared to a 100% EOU without reversing the credit.
- Interpretation of Notification No.1/95-CE regarding the exemption of excisable goods for 100% EOUs.

Analysis:
1. The appellant, a manufacturer of knitting machines, cleared products and inputs to a 100% EOU without payment of duty under Notification No.1/95-CE. Dispute arose regarding the availing of Modvat credit on inputs cleared to EOU without reversing the credit. Orders-in-Original were passed seeking to deny the Modvat credit availed. Appeals were rejected by the first appellate authority, leading to the current appeals (E/282/2001, E/283/2001, E/440/2003, E/476/2003).

2. The matter was referred to a Larger Bench due to conflicting decisions. The Larger Bench held that the appellant cannot remove inputs to EOU without reversing the credit. The appellant challenged this before the High Court of Madras, which remanded the matter back to the Tribunal for fresh consideration based on relevant observations.

3. The appellant argued that despite not fulfilling all conditions of the exemption notification, they are entitled to its benefits. They claimed entitlement to Modvat credit under Rule 57F without reversing the credit on inputs cleared to EOU. Reference was made to the judgment in the case of Solectron Centum Electronics Ltd. The Tribunal held that the appellant can avail Modvat credit on inputs and clear them to EOU without reversing the credit.

4. Citing the judgment in the Solectron Centum Electronics Ltd. case, the Tribunal decided in favor of the appellant, allowing them to avail Modvat credit on inputs cleared to EOU without reversing the credit. All four appeals were decided in favor of the appellant with consequential relief.

5. The Tribunal's decision was based on the interpretation of the relevant notification and the entitlement of the appellant to avail Modvat credit on inputs cleared to a 100% EOU without reversing the credit. The judgment aligned with the judicial discipline and previous decisions, providing relief to the appellant in this matter.