2017 (8) TMI 209 - AT - Central Excise

CENVAT credit - whether the CENVAT Credit on the capital goods at the time of debonding can be allowed to the appellants or not? - Held that - The Commissioner has given the finding that it would have been a case of premature debonding had the debonding been done before the dates indicated in the LOP issued by the Development Commissioner. We find that this interpretation of Ld. Commissioner is erroneous because once DGFT had given extensions in both the cases, extended period for bonding was relevant for this purpose and the debonding has to be viewed in terms of the duly extended date by the competent authority. Board Circular 185/19/96-CES dt. 19.03.1996 was superseded by the N/N. 35/2008-CE (NT) dt. 24.09.2008 - In these appeals, the debonding took place in July, 2007 and credit was taken in November, 2007. Hence, they are eligible for the benefit of the circular. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether Cenvat Credit on capital goods at the time of debonding can be allowed to the appellants or not.

Analysis:
The case involved an appeal against the impugned order regarding the availing of Cenvat Credit by the appellant, a manufacturer of Cotton Yarn under the Central Excise Tariff Act. The appellant's units were initially approved under the EOU scheme but later applied for pre-mature debonding in 2007. The Revenue alleged that the Cenvat Credit taken was wrongly availed, leading to two show cause notices demanding significant amounts. The main contention was whether the Cenvat Credit on capital goods at the time of debonding could be allowed to the appellants.

The appellant's advocate argued that the corrigendum issued after the replies to the show cause notices were filed should be disregarded, citing a Tribunal judgment. It was contended that the debonding was not premature as extensions were granted by the DGFT, making the extended period relevant for assessment. The Ld. Commissioner's interpretation was challenged, emphasizing that the debonding should align with the extended date by the competent authority.

The Tribunal analyzed various case laws supporting the admissibility of Modvat Credit/Cenvat Credit on indigenous capital goods at the time of debonding for 100% EOU. The reliance on a specific Board Circular was upheld, emphasizing that the benefit of credit on indigenous capital goods could not be denied to the appellants. Additionally, the Tribunal noted that the Circular was valid at the time of debonding, predating the Notification that supposedly superseded it.

Ultimately, the Tribunal found no merit in the Ld. Commissioner's order and set it aside, allowing the appeal in favor of the appellant. The judgment highlighted the importance of considering the extended period for debonding and affirmed the appellants' entitlement to Cenvat Credit on capital goods at the time of debonding, based on relevant legal provisions and precedents.

This detailed analysis of the judgment showcases the legal intricacies involved in determining the eligibility of Cenvat Credit on capital goods at the time of debonding, emphasizing the significance of timelines, extensions, relevant circulars, and established case laws in reaching a favorable decision for the appellant.