2016 (10) TMI 305 - AT - Central Excise

Conversion of DTA unit to EOU - reversal of cenvat credit u/r 3(5) of Cenvat Credit Rules, 2004 - inputs, consumables, work-in-progress on the day of conversion - goods having not manufactured or used in DTA unit and the same also could not have been procured under CT-3 certificate in terms of Notification No. 22/2003 - whether demand of duty and penalty justified on the ground that upon conversion of DTA to EOU the goods lying in that portion of converted unit would amount to removal of these goods and thereby attract the reversal of credit in terms of Rule 3(5) of Cenvat Credit Rules, 2004? - Reference made to the case of Privi Organics Ltd. vs. CCE, Raigad 2015 (10) TMI 287 - CESTAT MUMBAI . Held that - A part of DTA unit was converted to EOU and as such there is no evidence of any physical removal of any of the credit availed items as held in the appellant s own case 2016 (8) TMI 346 - CESTAT NEW DELHI and the issue was decided in favor of appellant. The decision of the case Privi Organics Ltd. not applicable to the present case as during that time the 100% EOU were outside the credit scheme. Credit available on conversion - demand of duty and penalty not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over cenvat credit on inputs, consumables, work-in-progress during conversion of DTA unit to EOU.

Analysis:
The appeals challenged an adjudication order regarding cenvat credit amounting to ?2,15,31,410 on goods transferred from DTA unit to 100% EOU during conversion. The Revenue argued that these goods were not manufactured or used in DTA unit and were not procured under CT-3 certificate, thus necessitating recovery. The original authority confirmed a demand of ?45,31,099 and imposed penalties on both appellants.

The appellant's counsel contended that the conversion to EOU was approved by the competent authority without any physical clearance of items, hence Rule 3(5) did not apply. They argued that EOUs are entitled to cenvat credit on these items post the Cenvat Credit Rules, 2002/2004, citing a favorable Tribunal order in their own case and various case laws.

The Revenue reiterated the original authority's findings, emphasizing the physical separation of the EOU premises as justification for denying credit and imposing penalties.

Upon examination, the Tribunal noted that no physical removal of credit availed items occurred during the conversion from DTA to EOU. Citing the appellant's previous successful case and relevant case laws, including Privi Organics Ltd. vs. CCE, Raigad and Sun Pharmaceuticals Ind. Limited vs. CCE, Pondicherry, the Tribunal found the Circular dated 18.09.2011 inapplicable as 100% EOUs were outside the credit scheme at that time. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.

Overall, the Tribunal's decision was based on the lack of physical removal of goods during the conversion and the applicability of favorable precedents and case laws in similar situations, leading to the reversal of the original authority's decision and the allowance of the appeal by the appellants.