2013 (4) TMI 28 - AT - Central Excise

Ascertainment of the term CVD under Rule 3(7) of the CENVAT Credit Rules for calculating actual amount of CENVAT credit. - 100% EOU unit - The dispute mainly relates to whether the term CVD used in the formula under Rule 3(7) of the CENVAT Credit Rules is admissible as for calculating the total amount of credit or not. Held that - The term CVD has not been specifically defined in the CENVAT Credit Rules and Board s Circular No. 818/15/2005-CX., dated 15-7-2005 also refers to 4% levied in terms of Section 3(5) of the Customs Tariff Act as CVD/Special CVD. we prima facie hold both the CVDs should be taken into account while determining the eligible amount of credit under Rule 3(7) of the CENVAT Credit Rules.

Summary

Issues: Dispute over calculation of CENVAT credit under Rule 3(7) of the CENVAT Credit Rules regarding the term "CVD" and eligibility percentages for duty paid on inputs received from different suppliers.

In the judgment delivered by the Appellate Tribunal CESTAT BANGALORE, the dispute revolved around the calculation of CENVAT credit under Rule 3(7) of the CENVAT Credit Rules concerning the term "CVD" and the eligibility percentages for duty paid on inputs received from two suppliers. The appellant had received inputs from two 100% EOU's and claimed credit of duty paid on those inputs. The disagreement arose regarding the method of calculating the available credit using the formula prescribed under Rule 3(7). Specifically, the controversy focused on the interpretation of the term "CVD" in the formula. The department contended that "CVD" referred to Additional Duty of Customs under Section 3(1) of the Customs Tariff Act, while the appellant argued it encompassed duties under both Section 3(1) and Section 3(5) of the Act. The appellants relied on the decision of the Tribunal in the case of Shri Venkateswara Precision Components to support their interpretation.

The Tribunal observed that the term "CVD" was not explicitly defined in the CENVAT Credit Rules, and a Board's Circular referred to a 4% levy under Section 3(5) of the Customs Tariff Act as CVD/Special CVD. Considering this, along with the precedent set by the Tribunal in the case of Shri Venkateswara Precision Components, the Tribunal held that both CVDs should be considered in determining the eligible credit amount under Rule 3(7) of the CENVAT Credit Rules. Consequently, the appellants were deemed to have a strong case in their favor for a substantial part of the amount in dispute. The appellants contended that only a specific amount was payable, which had already been paid.

Based on the above analysis, the Tribunal decided to waive the pre-deposit of the balance of dues as per the impugned order and stayed the recovery of the remaining amount until the appeal was disposed of. The judgment highlighted the importance of interpreting the term "CVD" in the context of the CENVAT Credit Rules and upheld the appellants' argument regarding the calculation of eligible credit based on duties paid by the 100% EOU's from which inputs were received.