2018 (5) TMI 191 - AT - Central Excise

CENVAT credit - part of the duty paid on the inputs received from a 100% EOU - Rule 3(7) of the CCR - Held that - Tribunal in the case of METACLAD Industries Vs. Commissioner of Central Excise, Mumbai-III 2012 (11) TMI 244 - CESTAT MUMBAI , where in identical circumstances, the benefit has been allowed, by holding that there is no warrant to restrict the scope of the term additional duty of customs occurring in the formula to only the additional duty leviable under sub-section (1) of section 3 and not to the additional duty leviable under sub section (5) thereof - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT Credit on duty paid on inputs received from a 100% EOU.

Analysis:

Issue 1: Denial of CENVAT Credit
The appellant, M/s Banco Product (I) Ltd., filed an appeal against the denial of CENVAT Credit on a portion of duty paid on inputs received from a 100% EOU. The appellant argued that as per Rule 3(7) of the CENVAT Credit Rules, 2004, the credit for inputs from a 100% EOU is restricted in a prescribed manner. The formula for calculating the credit involves specific ad valorem rates of basic customs duty and additional duty of customs. The appellant pointed out that the Revenue sought to exclude the SAD paid on the goods from the credit calculation. The appellant relied on a previous Tribunal decision where a similar benefit was allowed in identical circumstances.

Issue 2: Interpretation of Rule 3(7) of CENVAT Credit Rules
The Tribunal analyzed Rule 3(7) of the CENVAT Credit Rules, which prescribes the manner in which credit can be availed for goods received from a 100% EOU. The Tribunal referred to a previous case, METACLAD Industries, where it was observed that the expression "additional duty of customs leviable" in the rule is not qualified by any other term. The Tribunal emphasized that there are two additional duties of customs leviable under the Customs Tariff Act, and both should be taken into account for allowing CENVAT credit. The Tribunal highlighted that the purpose of CENVAT is to reduce the cascading effect of taxation, and hence, the credit should be available for both additional duties of customs. The Tribunal rejected the Revenue's contention to restrict the credit to only one additional duty, emphasizing the need for a broad interpretation to fulfill the objective of CENVAT.

Final Decision
The Tribunal found that the issue was identical to the previous decision in the METACLAD Industries case and was squarely covered by it. Therefore, the appeal was allowed, and the decision was pronounced in favor of the appellant, M/s Banco Product (I) Ltd., regarding the denial of CENVAT Credit on duty paid on inputs received from a 100% EOU.

This comprehensive analysis of the legal judgment highlights the key issues, arguments presented, the interpretation of relevant rules, and the final decision rendered by the Appellate Tribunal CESTAT AHMEDABAD.