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2019 (2) TMI 80 - AT - Central Excise100% EOU - Utilization of balance in CENVAT credit account for discharge of customs duty like basic customs duty, additional customs duty (CVD) and special customs duty - inputs which have been used for manufacturing finished goods and these finished goods are cleared to DTA claiming exemption under N/N. 21/2002-Cus, 22/2003-CE and 52/2003-Cus. Held that - There is no dispute as to the fact that the inputs were imported and customs duty was foregone as the appellant being EOU, that the finished goods are manufactured in the EOU and exported as also cleared locally i.e. into DTA and claiming exemption from payment of duty; that appellant is required to pay customs duty as calculated by the authorities on the inputs consumed for manufacturing of final products which were cleared locally into DTA - the relevant portions of the CENVAT credit Rules clearly indicate that the CENVAT credit cannot be utilised for payment of customs duty. In the case in hand, Revenue authorities are correct in demanding the amount of customs duty, in cash, on the raw materials consumed for manufacture of finished goods which are cleared to DTA by claiming exemption - No provisions in the CENVAT Credit Rules permit the appellant herein to use the balance for discharging the customs duty on the imported goods. The appellant should discharge all the customs duty in cash, calculated by the Revenue authorities, on the imported goods consumed in manufacturing of final products cleared to DTA claiming exemption, on that occurrence of event CENVAT credit which has been used for debiting the said amount should be recredited by the jurisdictional authorities - appeal disposed off.
Issues:
- Utilization of CENVAT credit for payment of customs duty on imported goods consumed in manufacturing finished products cleared to DTA. - Interpretation of Rule 3(4) of the CENVAT Credit Rules 2004. - Applicability of case laws in favor of the appellant. - Demand of customs duty in cash by Revenue authorities. - Restoration of CENVAT credit if customs duty paid in cash. Analysis: 1. The appellant, a 100% EOU, imported raw materials claiming customs duty exemption under specific notifications. The appellant cleared finished goods to DTA, claiming central excise duty exemption. Revenue authorities demanded payment of customs duty on inputs used for manufacturing finished goods cleared to DTA, which the appellant debited from the CENVAT register. Show-cause notices were issued, leading to disputes on utilizing CENVAT credit for customs duty payment. 2. The appellant argued that the CENVAT credit balance could be used to discharge customs duty on inputs consumed for manufacturing finished goods cleared to DTA. Referring to Rule 17 of Central Excise Rules 2002, the appellant contended that debiting CENVAT account equates to duty discharge. Case laws like Vikram Ispat and CCE & C Vs Suresh Synthetics were cited to support the appellant's position. 3. The Revenue authorities maintained that customs duty on inputs should be paid in cash, not through CENVAT credit. They clarified that the demand was specific to customs duty on inputs used for manufacturing finished goods cleared to DTA, not on exported goods. 4. The core issue revolved around whether the appellant could use CENVAT credit balance for customs duty payment on imported inputs consumed in manufacturing finished goods cleared to DTA, despite the exemption claimed on final products. 5. The Tribunal analyzed that CENVAT credit rules explicitly state that the credit cannot be utilized for customs duty payment. The appellant was required to pay customs duty in cash on inputs used for manufacturing finished goods cleared to DTA, as per the demand by Revenue authorities. 6. While directing the appellant to pay customs duty in cash as calculated by Revenue authorities, the Tribunal acknowledged the appellant's argument regarding CENVAT credit restoration if cash payments were made. The Tribunal ordered recrediting of CENVAT account upon cash payment of customs duty. 7. Ultimately, the Tribunal upheld the Revenue authorities' decision on demanding customs duty in cash for inputs used in manufacturing finished goods cleared to DTA. The appeals were disposed of, with the exception of the recredit order for CENVAT account upon cash payment of customs duty. This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal interpretations, and the final decision rendered by the Tribunal.
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