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2016 (8) TMI 346 - AT - Central ExciseDemand - Revarsal of Cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004 - Reorganization of part of assets of DTA into 100% EOU - Capital goods in which Cenvat credit was availed in the original DTA unit was segregated as part of the two EOUs - Held that - Rule 3(5) of the Cenvat Credit Rules contemplates payment of an amount equal to the credit availed in respect of inputs and capital goods when such goods are removed as such from the factory. The thrust of the appellant s argument is that the removal contemplated in the above Rule is the physical removal, of the inputs or capital goods on which credit is taken, from the factory of the manufacturer. In the present case in as much as the inputs and capital goods were not removed physically from the factory, the mischief of Rule 3(5) will not be invited. Also the issue is no longer res-integra in as much as identical issue has been considered time and again and decided in favour of the appellants by this Tribunal. Hence, in as much as EOUs are entitled to take as well as utilize Cenvat credit on inputs as well as capital goods, for payment of duty on the DTA clearances, the demand of duty made in the impugned order, if paid, will be available as Cenvat credit to the 100% EOUs. - Decided in favour of appellant
Issues:
1. Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 regarding reversal of Cenvat credit. 2. Applicability of CBEC Circular No. 77/99-Cus. dated 18/11/1999 in the context of Cenvat credit for 100% EOUs. 3. Transfer of credit from a DTA unit to a 100% EOU upon reorganization. 4. Consideration of case law precedents in similar matters. 5. Limitation on the recovery of unutilized credit after conversion to EOU. Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004: The case involved a challenge against the demand for reversal of Cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004 due to the reorganization of a DTA unit into EOUs without physical removal of capital goods. The Tribunal held that the physical removal of goods was a prerequisite for the application of Rule 3(5), and since no such removal occurred, the demand for reversal was not justified. The Tribunal cited precedents and observed that identical issues had been decided in favor of appellants in similar cases. Applicability of CBEC Circular No. 77/99-Cus. dated 18/11/1999: The appellant argued against the relevance of the CBEC Circular in light of Cenvat credit provisions for 100% EOUs. The Tribunal agreed with the appellant, emphasizing that the Circular did not address the transfer of credit under the Cenvat Credit Rules, 2004. The Tribunal noted that the Circular was issued when EOUs were outside the modvat/Cenvat credit scheme, which changed after the introduction of the CENVAT Credit Rules in 2004. Transfer of credit from a DTA unit to a 100% EOU upon reorganization: The Tribunal allowed the transfer of credit from the DTA unit to the 100% EOU upon reorganization, citing the absence of any specific prohibition under Rule 10 of the Cenvat Credit Rules, 2004. The Tribunal referenced previous judgments supporting the transfer of credit in such cases and ruled in favor of the appellant on this issue. Consideration of case law precedents: The Tribunal considered various case law precedents, including Privi Organics Ltd., Sun Pharmaceuticals Indus. Ltd., CCE vs. Sandoz Pvt. Ltd., CCE vs. Ashok Iron & Steel Fabricators, and CCE vs. Raveshia Colours Pvt. Ltd. to support the appellant's arguments and decision in this case. Limitation on the recovery of unutilized credit after conversion to EOU: Regarding the limitation on the recovery of unutilized credit after conversion to EOU, the Tribunal found that the appellant had disclosed all relevant details to the department upon conversion. The Tribunal concluded that the revenue could not allege willful misstatement or suppression of facts after a significant period had passed, thereby ruling in favor of the appellant on this aspect as well. In conclusion, the Tribunal allowed the appeal on both merits and limitation, considering the transfer of credit, the interpretation of Cenvat credit rules, and the applicability of case law precedents in favor of the appellant.
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