2015 (10) TMI 1919 - AT - Central Excise

CENVAT Credit - Credit on CVD - 100% EOU - whether the BCD should be the rate as specified in tariff or the basic custom duty which was payable by the 100% EOU - Held that - A combined reading of the Notification as also the proviso, it will be seen that there is no intention to restrict the CENVAT credit under the CENVAT Credit Rules but the intention is to permit the CENVAT only on the countervailing duty portion. Notification 23/2006 does not reduce the rate of basic customs duty but the quantum is reduced by 75%. In the proviso, taking into account this aspect, the words used are BCD/400. It is very clear that the term BCD in the second proviso implies the basic custom duty applicable on the goods by a normal importer from abroad. This duty rate may be tariff rate or an effective rate as per unconditional exemption Notification. - credit taken by the appellant is correct - Decided in favour of assessee.

Summary

Issues:
1. Availing credit of CV duty paid by 100% EOU - method of quantification/computation.

Analysis:
The case involved the appellant purchasing inputs from a 100% EOU and availing credit of CV duty paid by the EOU. The main issue was the method of quantification/computation of the credit availed. The appellant did not appear during the proceedings but requested a decision on merits. The learned AR argued that the proviso to Rule 3(7)(a) prescribed the method for availing CENVAT credit. The question arose regarding the interpretation of the term "BCD" and whether it should be the rate specified in the tariff or the basic customs duty payable by the 100% EOU. The AR contended that the term BCD should represent the duty payable by the EOU to restrict the credit availed by the unit.

The Tribunal reviewed the relevant Notification pertaining to 100% EOU during the relevant period. The Notification did not reduce the rate of basic customs duty but reduced the quantum by 75%. The proviso to Rule 3(7)(a) of the CENVAT Credit Rules, 2004 was also examined, which specified the formula for calculating CENVAT credit. The Tribunal observed that the intention was to permit CENVAT credit only on the countervailing duty portion, not to restrict it under the Rules. The term "BCD" in the proviso was interpreted to imply the basic customs duty applicable on the goods by a normal importer, which could be the tariff rate or an effective rate as per an exemption Notification.

Based on the analysis, the Tribunal concluded that the credit taken by the appellant was correct. The appeal was allowed with consequential relief if any. The judgment highlighted the interpretation of the term "BCD" in the context of availing CENVAT credit from a 100% EOU and clarified that the credit was correctly availed based on the applicable duty rates and provisions.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented, and the Tribunal's decision based on the interpretation of relevant legal provisions and Notifications.