2017 (4) TMI 428 - AT - Central Excise

CENVAT credit - debonding of EOU - Credit on imported capital goods, raw material and indigenous raw material at the time of de-bonding of a 100% EOU - Held that - The specific inclusion of the proviso in respect of the capital goods meant that the cenvat credit should be extended only to that extent and applicability of the Cenvat Credit Rules to raw materials and inputs, at the time of bonding by necessary implication stood excluded. As regards the Cenvat Credit on raw materials on account of wastage involving ₹ 12,022/-, assessee had taken credit of ₹ 12,022/- on duty paid on account of wastage of raw materials. Any waste of raw materials cannot be inputs and are not used in final product. Further Rule 2(l) specifically states input means all goods used in the factory for the manufacture of final products. Accordingly, the assessee is not eligible to take Cenvat credit on such waste. As regard the admissibility of cenvat credit on imported capital goods, cenvat credit has been denied on the ground that the assessee did not produce TR-6 challan, bills of entries or invoices containing the details of duty payment - Held that - The appellants have enclosed the copies of the official correspondences stating that (page 53 and 51 of the paper book) all the TR-6 challans in question were submitted to the department even before availing the cenvat credit. Since production of challans and eligibility thereof for cenvat credit on capital goods is a question of fact, which needs to be verified, the same is liable to be remanded to the adjudicating authority for verification. The order of the Commissioner is upheld in respect of duty, interest and penalty in relation to raw materials and waste - In respect of the capital goods, the matter is remanded back. On the issue whether the assessee is eligible to take credit on the basis of TR-6 Challans, the Commissioner (Appeals) has given no findings on the same, since the credit has been disallowed in respect of imported capital goods, raw materials and indigenous raw material. We agree with the Commissioner that the issue is superfluous in view of his disallowing the credit. Appeal allowed by way of remand.

Summary

Issues:
1. Eligibility of Cenvat Credit on imported capital goods, raw material, and indigenous raw material at the time of de-bonding of a 100% EOU.

Detailed Analysis:

Issue 1: Eligibility of Cenvat Credit on Imported Capital Goods, Raw Material, and Indigenous Raw Material at the Time of De-bonding of a 100% EOU

In Appeal No. E/40187/2014, the appellant, a former 100% EOU, surrendered its EOU status and became a DTA unit. The appellant paid appropriate duty on imported/indigenous raw materials and capital goods at the time of de-bonding. However, a show cause notice was issued for the alleged wrongful availment of Cenvat credit. The appellant claimed that the duty paid on imported capital goods and raw materials, as well as excise duty on indigenous raw materials, should be eligible for Cenvat credit. The appellant cited Circular No.185/90/96-CX and a High Court case to support their claim. The Revenue argued against granting Cenvat credit on the mentioned items due to the absence of specific provisions.

The Tribunal analyzed the Cenvat Credit Rules of 2004 and noted that the rules provide for inclusion, exclusion, and restrictions on availment and utilization of Cenvat credit. The Tribunal highlighted that the proviso relating to Cenvat credit on capital goods at debonding, added in 2008, indicated a legislative intent to allow credit only for capital goods at that time. The Tribunal emphasized that the rules did not extend this benefit to raw materials or inputs during debonding. The Tribunal differentiated the case law cited by the appellant, clarifying that it addressed capital goods and not raw materials.

Regarding the Cenvat Credit on raw materials, the Tribunal upheld the Commissioner's decision to deny credit based on the rules' provisions. The Tribunal also addressed the issue of waste-related Cenvat credit, emphasizing that waste of raw materials did not qualify as inputs for credit. The Tribunal dismissed the appellant's reliance on certain case laws as they were not directly relevant to the case at hand.

In Appeal No. E/40072/2015, a similar issue arose concerning the eligibility of Cenvat credit at the time of debonding under specific notifications and TR-6 Challans. The Commissioner rejected the appellant's plea, emphasizing the clear legal provisions introduced in 2008. The Tribunal concurred with the Commissioner's decision, applying the same reasoning as in the previous appeal. The Tribunal also addressed the TR-6 Challans issue, noting that since the credit had been disallowed for various items, discussing TR-6 Challans' validity was unnecessary.

In conclusion, the Tribunal dismissed the appeals in both cases, upholding the Commissioner's decision on raw materials and remanding the matter concerning imported capital goods for further verification. The Tribunal emphasized the importance of adhering to the specific provisions of the Cenvat Credit Rules in determining the eligibility for Cenvat credit on different items at the time of de-bonding.