2018 (6) TMI 244 - AT - Central Excise

Utilization of unutilized credit - conversion of DTA to EOU - CBEC Circular No.77/1999-Cus. dated 18.11.1999 - Whether the appellants are entitled to utilize the input credit lying unutilized on the date of their conversion from DTA to EOU on 1.12.2006? - Held that - Tribunal has been consistently holding that there was no provision prohibiting an EOU from availing balance of credit when the unit was converted into EOU from DTA - an EOU also manufacture goods for DTA clearances; in the absence of provisions requiring the DTA unit to reverse the credit balance at the time of its conversion into an EOU, the credit it had validly earned as a manufacturer continued to be available without any limitation of time or otherwise - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellants are entitled to utilize input credit after conversion from DTA to EOU.

Analysis:
The appeals filed by two companies were taken up together as they pertained to the same unit. The Commissioner of Central Excise issued a show-cause notice disentitling the appellants from credit of input stock held in various stages and seeking recovery of credit utilized after conversion to EOU. The Commissioner ordered expunging of certain credits but dropped proceedings for demand and penalty citing lack of jurisdiction. A separate show-cause notice by the Commissioner of Customs confirmed the ineligibility of credits transferred to EOU and demanded repayment for utilization towards DTA clearances. The precise issue revolved around the entitlement of appellants to utilize unutilized input credit post-conversion to EOU based on CBEC Circular No.77/1999-Cus. The authorities held that manufacturers could not utilize credits post-conversion despite a change in statute enabling EOUs to take CENVAT credit. The appellants cited settled cases to support their claim.

The counsel for the appellants relied on various cases to argue their case's settlement, emphasizing that the impugned order denying CENVAT credit balance and demanding repayment was not sustainable. The Departmental Representative reiterated the original authorities' findings. The Tribunal found the issue raised in the appeals to be consistently upheld by various benches, stating that there was no provision prohibiting an EOU from availing credit balance post-conversion. The Tribunal held that in the absence of provisions mandating reversal of credit balance at conversion, the credit earned by the DTA unit continued to be available without limitation.

In conclusion, the Tribunal allowed both appeals, emphasizing that there was no prohibition for an EOU to utilize credit balance post-conversion from DTA. The decision was based on consistent Tribunal rulings upholding the availability of earned credits without time limitation post-conversion.