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2012 (11) TMI 767 - AT - Central Excise100% Export Oriented Unit utilization of cenvat credit - Some quantities of imported duty free inputs and indigenously procured inputs have been cleared as such to DTA without using them for manufacture of final products in the E.O.U. Held that - Rule 17 of the Central Excise Rules referred to excisable goods manufactured by 100% E.O.U. and the same cannot apply to inputs cleared as such and that too for inputs imported and cleared as such - CENVAT credit cannot be utilized for paying Customs duty on imported goods and paying Excise duty on inputs which are cleared as such when such inputs were procured without payment of duty and therefore without credit being taken on such inputs. Rule 3(4) of the CENVAT Credit Rules specifically refers to the purpose for which the CENVAT credit by an assessee can be utilized. The claim on behalf of the appellant that the inputs cleared by them as such should be treated as on par with final products on the ground that they are required to pay duty on them is also, prima facie, not acceptable. The CENVAT Credit Rules clearly distinguish items like inputs , capital goods and final products . There appears no scope for entertaining a belief that inputs cleared as such by the manufacturer-assessee could be treated as clearances of final products. - prima facie against assessee - pre deposit of Rs. one crore only ordered.
Issues:
1. Utilization of CENVAT credit for payment of Customs duty on imported goods and duty on indigenously procured goods cleared to DTA. 2. Interpretation of Rule 17 of the Central Excise Rules and Rule 3(4) of the CENVAT Credit Rules. 3. Invocation of extended period of limitation. 4. Bona fide belief in compliance with previous orders. 5. Requirement of pre-deposit and waiver of balance dues. Analysis: Utilization of CENVAT Credit: The appellant, a 100% Export Oriented Unit (E.O.U.), imported duty-free inputs and procured indigenous inputs without payment of duty. They cleared some of these inputs to the Domestic Tariff Area (DTA) without using them for manufacturing final products in the E.O.U. In response to a show-cause notice, the Commissioner demanded Customs duty on the cleared goods and imposed penalties, stating that the appellant was not entitled to use CENVAT credit. The appellant argued that they were entitled to use the credit based on Rule 17 of the Central Excise Rules and Rule 3(4) of the CENVAT Credit Rules. Interpretation of Rules: The appellant contended that Rule 17 of the Central Excise Rules should apply to the clearance of inputs as such by the E.O.U., allowing them to use CENVAT credit. However, the Tribunal noted that Rule 17 refers to excisable goods manufactured by the assessee, and the inputs cleared as such cannot be treated as final products. Similarly, Rule 3(4) of the CENVAT Credit Rules specifies the purpose for utilizing the credit, distinguishing between inputs, capital goods, and final products. The Tribunal found no basis for treating cleared inputs as final products. Extended Period of Limitation: The appellant argued that the duty demands were within the normal period of limitation as they had obtained permission for DTA clearances and regularly filed ER-2 Returns. However, the Commissioner invoked an extended period of limitation, noting that the appellant had not shown the utilization of credit in their returns for the cleared inputs. Bona Fide Belief and Pre-Deposit: The appellant claimed a bona fide belief based on a previous order of the Commissioner (Appeals), but the Tribunal expressed reservations about this belief. Considering the facts and circumstances, the Tribunal directed the appellant to deposit a specified amount within a deadline, with a waiver of the balance dues subject to compliance. Conclusion: The Tribunal upheld the Commissioner's decision regarding the utilization of CENVAT credit, interpretation of rules, and invocation of extended limitation period. The appellant was directed to make a pre-deposit, with a waiver of the balance dues upon compliance, pending the appeal's disposal.
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