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2019 (2) TMI 937 - AT - Central ExciseDebonding of unit - scope of SCN - Held that - The grounds of appeal do not dispute the factual position. The grounds of appeal are beyond the scope of the show cause notice. The grounds of appeal are without any merit. Hence, the appeals filed by the Revenue are liable to be rejected and consequential refund should be allowed to the Respondent. Time limitation - it has been held by the Commissioner (Appeals) that the appeal is time barred - Held that - The said finding is a finding of fact. The said finding has not been challenged by the department. In other words, the demand has been set aside by the Commissioner on merits as well as limitation. However, in the instant appeals, the challenge is only on the merits of the case. The department seems to have accepted the order on limitation. Once the entire demand is time barred and it has been accepted by the Department, the question on merits would become purely academic. On this count alone, the present appeals filed by the department are liable to be dismissed. Nature of duty payable at the time of de-bonding - Held that - even on merits, there is no case made out by the department in the instant appeal. The only case made out by the department in the show cause notice dated 01.11.2013 was that the nature of duty payable on the goods, which were procured indigenously, cleared by EOU to DTA is customs duty and not central excise duty. The show cause notice alleged that the goods cleared by EOU to DTA are to be treated as imported goods as EOU cannot be considered as located in India - the case id thus devoid of any merit. Discharge of excise duty liability by utilization of cenvat credit - Held that - Revenue is of the view that the payment of central excise duty by the respondent at the time of de-bonding by debiting cenvat credit is incorrect. There is no legal basis for this view - as per Rule 17 of the Central Excise Rules, 2002 provides that in case where goods are removed from EOU to DTA, such removal shall be made under invoice and the duty leviable on such goods may be paid by utilizing the available cenvat credit or in cash. Thus, an EOU is permitted to utilize cenvat credit for discharging excise duty on removal of goods from EOU to DTA. Availment of cenvat credit of the excise duty paid on indigenous procured goods, SAD paid on capital goods imported and CVD and SAD paid on imported raw material - Held that - The Revenue contends that the respondent is not eligible to avail cenvat credit on the inputs and consumables as the cenvat credit of the same is available at the time when the inputs and consumables are procured in the factory of manufacture of final product. This contention is without any legal basis. In the instant case, inputs and capital goods fall within the definition of input and capital goods as defined under Cenvat Credit Rules, 2004. This fact is not under dispute. The said inputs and capital goods were received in the factory of manufacturer and the same have been used in the manufacture of final products (excisable goods). This fact is also not under dispute. Furthermore, the Respondent has issued invoice under Rule 11 of the Central Excise Rules, 2002 while making payment of duty on such indigenous procurements. Hence, it is evident that the Respondent has fulfilled all the conditions of Rule 3 of the Cenvat Credit Rules, 2004 for availing credit of duty paid on such inputs and capital goods - credit of SAD should also be extended to the respondent on all imported procurement and not only on capital goods. Customs duty paid by debiting EPCG license and advance license - Held that - The case of the department is that the customs duty paid, at the time of de-bonding, by the respondent through debiting EPCG license and advance authorization is not correct in terms of FTP 2009-14, as the advance license and EPCG license were obtained long after the cut-off date and hence, the same cannot be allowed to discharge Customs duties. This contention is without any legal basis - In identical set of facts, this Tribunal in Welspun Zucchi Textiles V/s CCE 2006 (8) TMI 55 - CESTAT, MUMBAI , wherein the issue was utilization of EPCG license for payment of duties on second hand machinery, at the time of de-bonding of EOU, which was duly allowed by the Development Commissioner. In the said judgment, In principle approval for de-bonding was obtained on June 29, 1999, and the EPCG license was obtained on August 5, 1999, and benefit under the EPCG scheme was granted even though the EPCG license was obtained after acquiring the in-principle approval for de-bonding by Development Commissioner. Duty foregone on finished goods and raw materials exported pursuant to cut-off date - Held that - The Revenue contends that the Respondent is liable to pay customs duty on the finished goods exported and raw material re-exported after the cut-off date as the respondent shall not be eligible for the benefits available to an EOU. There is no basis for this argument - the respondent cannot be placed in an indeterminate state in the intervening period till the NDC or final de-bonding order is obtained. Therefore, the respondent unit continues to remain an EOU till the date of final de-bonding order and is eligible to export finished goods without payment of duty under Bond B-17 - Even otherwise, assuming whilst denying, that the respondent is liable to discharge excise duty and customs duty in respect of the finished goods and raw materials, lying in exit stock, it would be a case of revenue neutrality as the respondent would be entitled to refund of the duty so paid. Hence, the entire exercise is purely academic and having no revenue implications. Liability of duty on WIP/semi-finished goods - Held that - It is well settled that central excise duty is payable on excisable goods as defined under section 2(e) of the Central Excise Act. No central excise duty is payable at intermediate stage. No goods are manufactured or produced at that stage. Appendix 14-I-L of the FTP Handbook of Procedures Vol. 1 outlines the exit from the EOU Scheme. The said appendix lays down the applicable customs and excise duties payable by the unit on imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods. It does not provide for payment of duties on WIP. Obviously and logically so. Therefore, no duties of customs are payable on WIP at the time of debonding. Once the appeal filed by the Department is rejected, the action proposed by the Revenue on the refund application is negated. Hence, the payment of duties, in cash, subsequently, after the objection taken by the department, becomes refundable to the Respondent. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Legality of the mode of payment of duties at the time of de-bonding. 2. Eligibility of cenvat credit on CVD and SAD paid on raw materials and capital goods. 3. Time-barred nature of the demand. 4. Nature of duty payable at the time of de-bonding. 5. Discharge of excise duty liability by utilizing cenvat credit. 6. Customs duty paid by debiting EPCG license and advance license. 7. Duty foregone on finished goods and raw materials exported post cut-off date. 8. Duty liability on work-in-progress (WIP) or semi-finished goods. Detailed Analysis: 1. Legality of the Mode of Payment of Duties at the Time of De-bonding: The case involved the appellant's de-bonding from the EOU scheme and the mode of payment of duties. The Department objected to the payment method, insisting on cash payments instead of utilizing cenvat credit. The Tribunal found no legal basis for the Department's objection, referencing Rule 17 of the Central Excise Rules, 2002, which allows the use of cenvat credit for discharging excise duty on removal of goods from EOU to DTA. This view was supported by previous Tribunal rulings, including CCE V/s Gangeshwar Shipping Mills and Tecumseh Products India P. Ltd. vs. CCE. 2. Eligibility of Cenvat Credit on CVD and SAD Paid on Raw Materials and Capital Goods: The Tribunal found that the appellant fulfilled all conditions under Rule 3 of the Cenvat Credit Rules, 2004, for availing credit on duty paid on inputs and capital goods. The Department's selective allowance of cenvat credit only for CVD and not for SAD was deemed arbitrary and unjustified. The Tribunal emphasized that cenvat credit of SAD should be extended to all imported procurements, not just capital goods. 3. Time-barred Nature of the Demand: The Tribunal upheld the Commissioner (Appeals)'s finding that the demand was time-barred. The Department did not challenge this finding, and thus, the entire demand was set aside on grounds of limitation. This decision was supported by precedents like CCE V/s Balakrishna Industries and CCE V/s Echjay Forging Private Limited. 4. Nature of Duty Payable at the Time of De-bonding: The Tribunal rejected the Department's claim that customs duty, not central excise duty, was payable on goods cleared by EOU to DTA. It held that the duty payable on de-bonding is central excise duty for indigenously procured goods and customs duty for imported goods. This view was consistent with the Larger Bench decision in Vikram Ispat vs. CCE and the provisions of the Foreign Trade Policy (FTP) 2009-14. 5. Discharge of Excise Duty Liability by Utilizing Cenvat Credit: The Tribunal confirmed that utilizing cenvat credit for discharging excise duty at the time of de-bonding was correct and legal. This was in line with Rule 17 of the Central Excise Rules, 2002, and supported by multiple Tribunal rulings. 6. Customs Duty Paid by Debiting EPCG License and Advance License: The Tribunal found no legal basis for the Department's objection to the use of EPCG and advance licenses for discharging customs duty at the time of de-bonding. It noted that the licenses were obtained legally and prior to the issuance of the 'No Dues Certificate.' The Tribunal referenced the Welspun Zucchi Textiles case, which allowed the use of EPCG licenses obtained after in-principle approval for de-bonding. 7. Duty Foregone on Finished Goods and Raw Materials Exported Post Cut-off Date: The Tribunal held that the respondent continued to be treated as an EOU until the final de-bonding order and was eligible to export finished goods without payment of duty under Bond B-17. This view was supported by the Tribunal's decision in Jubilant Life Sciences Limited Vs. CCE. 8. Duty Liability on Work-in-progress (WIP) or Semi-finished Goods: The Tribunal clarified that no central excise duty is payable on WIP or semi-finished goods at the time of de-bonding, as they do not qualify as 'excisable goods' under Section 2(e) of the Central Excise Act. This view was consistent with the Tribunal's ruling in Tirumala Seung Han Textiles Limited V/s CCE. Conclusion: The Tribunal dismissed the Department's appeals and allowed the assessee's appeals, granting consequential refunds along with interest. The Tribunal's decision was based on a detailed analysis of the facts, legal provisions, and relevant case law, ensuring that the appellant's actions were in compliance with the applicable rules and regulations.
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