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2024 (11) TMI 4 - AT - Central ExciseUtilization of CENVAT credit for payment of duty, in respect of inputs procured duty free, when the same are cleared as such, by a 100% EOU into DTA or utilization of CENVAT credit - invoking extended period of limitation - Whether the demand of duty by invoking the extended period, confiscation of goods, imposition of redemption fine and penalty imposed on the appellants are legally sustainable or not? - HELD THAT - On perusal of the various permission letters granted by the Department to the appellants, we find that these cover the entire period of dispute, from June, 2008 to April, 2009. In view of the above evidences, where the jurisdictional central excise authorities are not only aware of the clearances of inputs as such being made by the appellants, but have given specific permission for such removal, then it cannot be stated that the Department is unaware of such clearances and therefore any SCN issued for demand of duty by invoking extended period is not legally sustainable. We find that in the case of Commissioner of Central Excise, Mumbai Vs. Blue Star Ltd. 2015 (3) TMI 628 - SUPREME COURT have held that extended period is not invokable in the case of goods cleared through CT-3 procedure by 100% EOU unit. As demand confirmed under the extended period is not sustainable. Further, we find it is not even be possible for sustaining the demand of duty for the normal period, as in the present case, the SCN have not been issued within the permitted period one year from the relevant date for covering the normal period of demand. Since the inputs have been cleared as such from the 100% EOU unit to DTA, in terms of Section 3 ibid, applicable duties of central excise are required to be paid on such goods. As the appellants had discharged such duty payable on these goods, by debiting from their CENVAT credit account, which is also available for taking further CENVAT credit by the buyer, no further duty payment is required to be made through PLA/cash. Since the adjudged demands are liable to be set aside on the ground of non- sustainability of extended period of limitation, and that normal period of demand is not covered in the SCN, there is no fresh duty payment involved for such goods. No merits in the impugned order passed by Commissioner (Appeals) as it does not stand the scrutiny of law. Therefore, by setting aside the impugned order the appeal is allowed in favour of the appellants.
Issues Involved:
1. Whether the CENVAT credit can be utilized for payment of duty, in respect of inputs procured duty-free, when the same are cleared as such by a 100% Export Oriented Unit (EOU) into the Domestic Tariff Area (DTA) under Rule 3(4) of the CENVAT Credit Rules, 2004? 2. Whether the demand of duty by invoking the extended period, confiscation of goods, imposition of redemption fine, and penalty imposed on the appellants are legally sustainable? Detailed Analysis: 1. Utilization of CENVAT Credit: The core issue revolves around the applicability of Rule 3(4) of the CENVAT Credit Rules, 2004 in the context of a 100% EOU clearing inputs procured duty-free into the DTA. The appellants contended that they correctly discharged the central excise duty on inputs removed as such into DTA, utilizing CENVAT credit as allowed under Rule 17 of Central Excise Rules, 2002, which governs the removal of goods by a 100% EOU. They argued that the phrase "any goods" in Rule 17 permits the utilization of CENVAT credit for such clearances. The appellants cited precedents where similar issues were decided in their favor, emphasizing that the duty was already paid by debiting the CENVAT credit account, and further demand would result in double taxation. The Tribunal examined the legal provisions, particularly Rule 3 of the CENVAT Credit Rules, 2004, which outlines the conditions under which CENVAT credit can be taken and utilized. It was observed that since the inputs were procured duty-free under CT-3 certificates, there was no initial CENVAT credit taken on these inputs. Hence, utilizing CENVAT credit for payment of duty on such duty-free inputs when cleared as such into DTA was not permissible. The Tribunal concluded that Rule 3(4) does not allow the utilization of CENVAT credit for non-duty paid inputs procured duty-free under CT-3 certificates. 2. Legality of Extended Period and Penalties: The second issue addressed the legality of invoking the extended period for demand of duty, confiscation of goods, and imposition of penalties. The Show Cause Notice (SCN) was issued on 30.08.2012 for clearances made from October 2007 to April 2009, invoking the extended period on grounds of clearance without the Department's knowledge. However, the appellants argued that all clearances were made with specific approval from jurisdictional Central Excise Officers, and details were disclosed in periodical returns. The Tribunal found that the Department was aware of the clearances, as evidenced by permissions granted by the jurisdictional authorities covering the entire disputed period. Citing the Supreme Court's decision in Commissioner of Central Excise, Mumbai Vs. Blue Star Ltd., the Tribunal held that the extended period is not invokable when the Department is aware of the facts, rendering the SCN time-barred. The Tribunal further noted that the SCN was issued beyond the normal period of one year from the relevant date, making the demand unsustainable even for the normal period. Consequently, the adjudged demands, penalties, and confiscation were set aside due to the non-sustainability of the extended period and absence of any fresh duty payment requirement. Conclusion: The Tribunal concluded that the impugned order did not withstand legal scrutiny and set aside the order dated 20.01.2015, allowing the appeal in favor of the appellants. The appeal was pronounced in the open court on 28.10.2024, with the Tribunal emphasizing the non-applicability of extended period and the improper utilization of CENVAT credit under the given circumstances.
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