2016 (10) TMI 34 - AT - Central Excise

100% EOU - Cenvat credit - High Speed Diesel - appellants vide Circular No. 799/32/2004 CX dated 23.09.2004 procured HSD on payment of duty and availed CENVAT Credit - appellant argued that facility of Cenvat Credit was extended to EOUs w.e.f. 06.09.2004 vide Notificaiton No. 18/2004-CE(NT) dated 06.09.2004 which amended Rule 17 of the Central Excise Rules, 2002 to enable EOUs to pay duty on clearances made to DTA by utilizing Cenvat Credit. Also Notification No. 22/2003 dated 31.03.2003 provided that specified goods when brought into an EOU from the DTA in connection with manufacture of articles, shall be exempt from the whole of the duty of excise leviable thereon. Held that - it is found that the definition of an input given in Rule 2(k) of CENVAT Credit Rules, 2004 cannot restrict the entitlement, when they are taking CENVAT credit in terms of Notification No.22/2003 dated 31.3.2003. More so, when the decisions of the Tribunal viz., Hindustan Unilever Ltd. vs. CCE, Bhavnagar 2009 (7) TMI 605 - CESTAT, AHMEDABAD and CCE vs. Jagmini Micro Knit Pvt. Ltd. 2008 (11) TMI 169 - CESTAT, NEW DELHI make it clear that appellants as an EOU can claim CENVAT credit for the duty paid on HSD oil used as fuel and when they are eligible to avail the benefit of the said Notification. Therefore, the Revenue s contention that in terms of definition of input given in Rule 2(k) of CENVAT Credit Rules, 2004 the appellants are not entitled to claim CENVAT credit, cannot be accepted, when the Notification No.22/2003 dated 31.3.2003 makes an EOU entitled to claim CENVAT credit on the procurement of HSD used as fuel. - Decided in favour of appellant

Summary

Issues:
Demand of CENVAT credit on High Speed Diesel, interest, and penalty against Gem Granites.

Analysis:
The case involved Gem Granites, a 100% EOU, facing demands on CENVAT credit taken on High Speed Diesel (HSD) along with interest and penalties. Gem Granites argued that they were entitled to CENVAT credit under Circular No. 799/32/2004-CX, allowing EOUs to receive goods on duty payment and claim CENVAT credit. They procured HSD under Central Excise Tariff Act, 1985, and availed credit reflected in their returns. The Revenue issued show-cause notices disallowing credit based on Rule 2(k) of CENVAT Credit Rules, 2004, excluding HSD from the definition of input. Gem Granites cited Notification No. 22/2003 exempting EOUs from excise duty on specified goods, including fuel like HSD. They relied on case laws like Hindustan Unilever Ltd. vs. CCE and Commissioner of Central Excise vs. Jagmini Micro Knit Pvt Ltd to support their entitlement to CENVAT credit on HSD.

The main issue was whether Gem Granites, as a 100% EOU, could claim CENVAT credit on HSD despite Rule 2(k) exclusion. The Tribunal found Gem Granites eligible for credit under Notification No. 22/2003 exempting HSD procurement for EOUs from duty. The Circular No. 799/32/2004-CX further supported their right to claim refund under Rule 5 of CENVAT Credit Rules if credit remained unutilized. The Tribunal emphasized that the definition of input in Rule 2(k) could not restrict Gem Granites' entitlement when they were compliant with the notification. Previous Tribunal decisions reinforced Gem Granites' right to claim credit for HSD used as fuel. The Tribunal rejected the Revenue's argument based on Rule 2(k) and cited case laws like Imperial Granites Pvt. Ltd. and Sangam Spinners Ltd. as inapplicable to Gem Granites, an EOU, not a DTA industry.

In conclusion, the Tribunal allowed all appeals by Gem Granites, setting aside the demands and penalties imposed by the Revenue. The judgment was pronounced on 29/09/2016, in favor of Gem Granites.