2021 (11) TMI 945 - AT - Central Excise

100% EOU - CENVAT Credit - supplementary invoices/document on which credit taken - duty paid due to closer of advance licenses in which the appellant had failed the fulfilled the export obligation as per undertaking given by them - delay in taking credit - transfer of credit as per Rule 10(3) of the Cenvat Credit Rules 2004 - HELD THAT - The impugned order holds that the Cenvat credit cannot be availed on the basis of supplementary invoices issued by a manufacturer or importer in case of additional amount of Excise duty or additional duties leviable under section 3 of the Customs Tariff Act paid become recoverable on the account of non levy or short levy by reason of fraud collusion or any willful mis- statement or suppression of fact etc. There is no charge that in the show cause notice that there was any fraud collusion or any willful mis- statement or suppression of fact on the part of the appellant and therefore the observations made in the impugned order are irrelevant. In fact the impugned order does not even allege that the said duty was recovered on account of fraud collusion etc. Document on the strength of which credit has been taken - HELD THAT - The impugned order takes note of Rule 9 of Cenvat Credit rules to hold that challans are not specified documents except in the circumstances when they are supplementary to the original invoice - Rule 9 permits taking of credit on challans however the impugned order holds that credit cannot be taken on the strength of all the challans. It holds that only when an additional amount on duty becomes payable that credit can be availed on the strength of the challans. In the instance case the original duty paying document is bill of entry and the challans are the documents on the strength of which additional duty has been paid. Thus even going by the logic given by the Commissioner in the impugned order there is no bar on availing credit on the strength of challans - there are no merit in this argument of the Commissioner in the impugned order. Delay in taking of credit - HELD THAT - In the instances case the duties were paid in the year 2008 and 2009 and credit was taken on 30.11.2009. The duty was paid in the year 2008/2009 and credit was availed on 30.11.2009. At the material time there is no time limit specified for taking of credit. In the year 2014 when time limit for availment of credit was specified a limit of 1 year was given. In these circumstances there are no merit in this argument of Commissioner also. Transfer of CENVAT Credit - Rule 10 of the Cenvat Credit Rules - HELD THAT - Rule 9 clearly specified that in case of merger transfer of credit shall be allowed only if the stock of input as such or in process or the capital goods is also transferred along with the factory or business premises to the new site or ownership and the inputs or capital goods on which the credit has been availed are duly account for to the satisfaction of Deputy Commissioner of Central Excise as a case may be. In the instance case it is notice that the permission for conversion of DTA unit to EOU unit was initially granted by the Development of Commissioner KASEZ thereafter the Assistance Commissioner of Central Excise and Customs Div-Vapi granted license on 15.01.2007. However from the record it is not clear if the exercise of dealing the transfer of stock of inputs as such or in process all the capital goods transferred was done - in the instance case it is seen that the issue is not covered by the mischief of Rule 10. It is seen that the appellant merged two units in the year 2007. This duty was paid subsequently by the merged unit in the year 2008/2009. Thus it is not a case falling within the ambit of Rule 10 of the Cenvat Credit Rules and the same is therefore not applicable to the instance case. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat Credit, demand of interest, and penalty.

Analysis:

Issue 1: Denial of Cenvat Credit
The appellant, a 100% EOU, faced denial of Cenvat Credit due to alleged irregularities during the conversion of a DTA unit into an EOU and subsequent merger. The show cause notice claimed that duties paid on inputs transferred from the DTA unit to the EOU were not eligible for credit due to failure to fulfill export obligations. The appellant argued that all duties paid on inputs used for manufacturing should be eligible for credit. The Tribunal cited precedents to support the appellant's position, emphasizing that EOUs can avail credit on inputs/capital goods during conversion.

Issue 2: Transfer of Credit under Rule 10
The Commissioner contended that Rule 10 of the Cenvat Credit Rules prohibits the transfer of credit unless stock of inputs/capital goods is transferred along with the factory/business premises. The Tribunal disagreed, noting that the merger of the two units under the same legal entity allowed for credit transfer. The Tribunal found no violation of Rule 10 as the duties were paid after the merger, not during the conversion, making the rule inapplicable to the case.

Issue 3: Availment of Credit on Challans
The Commissioner raised concerns about availing credit based on challans, arguing that it should only be allowed for additional duties payable. The Tribunal disagreed, stating that the original duty paying document was the bill of entry, and challans were used for additional duty payments. The Tribunal found no prohibition on availing credit based on challans in this context.

Issue 4: Timing of Credit Availment
The Commissioner questioned the delay in availing credit, citing a previous tribunal decision on the term "immediate." The Tribunal dismissed this argument, noting that there was no significant delay in credit availment and no specific time limit existed at the time. The Commissioner's argument regarding timing was deemed meritless.

Conclusion
The Tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeal against the denial of Cenvat Credit, interest demand, and penalty. The judgment emphasized the eligibility of EOUs to avail credit on inputs/capital goods during conversions and rejected the Commissioner's objections regarding credit transfer, challan-based credit availment, and timing of credit availment.

This detailed analysis of the judgment highlights the key legal arguments, interpretations of rules, and precedents considered by the Tribunal in reaching its decision.