2015 (1) TMI 500 - AT - Central Excise

Waiver of pre deposit - 100% EOU - received goods free of duty but returned the rejected goods on payment of duty of excise through cenvat credit to the supplier of goods - Revenue s objection is that under Rule 3(4) of the CENVAT Credit Rules, cenvat credit can be utilized for payment of duty in the specified circumstances. - Held that - In this case, the applicant is not the manufacturer of the goods in dispute. We also note that when the inputs were originally cleared by the supplier, no excise duty was paid and hence no cenvat credit was taken by the applicant. Prima facie, to us it appears that there was no need to pay any duty when the goods were being returned to the original supplier. By the above process, accumulated cenvat credit got shifted from the applicant to the supplier s unit. We have also considered the Tribunal s decision mentioned by the learned counsel. Keeping in view the overall facts, we direct the applicant to deposit 7.5% of the duty demanded, in cash, within a period of eight weeks - Partial stay granted.

Summary

Issues:
Utilization of cenvat credit for payment of duty on rejected inputs by a 100% EOU.

Analysis:
The case involved a 100% EOU procuring inputs from domestic manufacturers free of excise duty, testing them, and sometimes rejecting and returning them to the supplier. The issue was whether the applicant could pay excise duty on rejected inputs by debiting the accumulated cenvat credit available to them, as objected by the Revenue citing Rule 3(4) of the CENVAT Credit Rules.

The Revenue contended that since no excise duty was paid on the inputs at the time of original clearance, no cenvat credit was taken, making the CENVAT credit Rules inapplicable. The Revenue argued that the applicant was not required to pay duty from the cenvat credit account during the clearance of the goods.

The applicant's counsel argued that under Rule 8 of the Central Excise Rules, duty could be paid either in cash or cenvat credit, and there was no stipulation for cash payment only. The counsel also relied on a Tribunal decision and claimed that the department was informed, precluding the invocation of the extended period of limitation.

The Tribunal noted that the duty is typically paid by the manufacturer of the goods, which the applicant was not. It observed that no excise duty was paid on the inputs originally, and no cenvat credit was taken by the applicant. The Tribunal opined that there seemed to be no requirement to pay duty when returning goods to the supplier, resulting in the shifting of accumulated cenvat credit. Considering the facts and the Tribunal's decision cited by the applicant's counsel, the Tribunal directed the applicant to deposit 7.5% of the demanded duty in cash within eight weeks, with a stay on the recovery of the remaining amount pending compliance.

In conclusion, the judgment addressed the issue of utilizing cenvat credit for duty payment on rejected inputs by a 100% EOU, clarifying the applicability of CENVAT Credit Rules and Central Excise Rules in such scenarios.