2023 (6) TMI 458 - AT - Central Excise

100% EOU - Recovery of Customs Duty - imported inputs cleared - indigenous goods cleared to DTA - clearance of raw materials/ inputs to DTA units after obtaining permission from their jurisdictional Central Excise officials - demand on the ground that when such duty free inputs are cleared from EOU to DTA the Duty is required to be discharged by way of cash payment by way of debit in the PLA Account whereas the Appellants have utilized the Cenvat credit which is not legal and proper - benefit of N/N. 52/2003-CUS dt. 31.03.2003 and N/N. 22/2003-CE dt. 31.03.2003 - time limitation - interest and penalties. HELD THAT - As per the decisions in COMMR. OF C. EX. CUS. VISAKHAPATNAM VERSUS MATRIX LABORATORIES LTD. 2012 (11) TMI 726 - CESTAT BANGALORE and CC CE HYDERABAD-IV VERSUS M/S. HETERO LABS LTD. 2017 (5) TMI 1338 - CESTAT HYDERABAD it has been held that the EOU Assessee is eligible to utilize Cenvat credit when they clear inputs/ raw materials to DTA unit. However from the decision of the Hyderabad Tribunal in the case of M/S DIVIS LABORATORIS LTD HYDERABAD VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS VISAKHAPATNAM 2019 (2) TMI 80 - CESTAT HYDERABAD it was held that if the raw materials/ inputs cleared pertain to procuring the inputs by getting the benefit of Notification No. 52/2003-CUS the EOU is required to pay the duty only by way of cash and Cenvat credit cannot be utilized since the inputs were imported by claiming Customs Duty exemption. In the present case the Appellant is required to pay the duty only by way of cash debit (PLA debit). They are not eligible to utilize Cenvat credit for such clearances - since the Appellant has procured the goods indigenously the clearances can be made by debiting Cenvat credit account. Time Limitation - HELD THAT - The Appellants have kept the Department informed about their clearances by seeking permission for clearance of imported/ indigenous raw materials/ inputs. Further they have paid the requisite duty by way of Cenvat debit. It is not the case of the Department that the Appellant has evaded the payment of duty by not paying the same either by way of cash payment (PLA debit) or by way of Cenvat debit. In both the cases the Appellant blocks his money. Therefore by utilizing Cenvat credit for such payment which is also part of his liquid assets the Appellant does not stand to gain any monetary benefit - the Appellant could be holding bonafide belief that they are eligible to utilize Cenvat credit for only clearances. Further as there are Tribunal decisions in their favour during the period under dispute the issue would be that of interpretation only. Taking all these facts into account it is felt that the Department cannot allege any suppression on part of the Appellant. Therefore the demand pertaining to the extended period is liable to be set aside in all the Appeals wherever the demand has been confirmed for the extended period - The Appellant is required to pay the duty involved for the normal period. Interest and penalties - HELD THAT - Since the duty was already paid by way of Cenvat credit there being no revenue loss to the Department interest and penalties are set aside. Since the Appellant is making good the payment by way of cash the Appellant would be entitled to get the relief for the Cenvat debits already made by them. For this they will be free to approach the appropriate forum for getting the relief. Appeal disposed off.

Summary

Issues Involved:
1. Legality of utilizing Cenvat credit for duty payment on raw materials cleared to DTA units.
2. Applicability of extended period for demand under Proviso to Section 11A(1) of Central Excise Act, 1944 and Section 28 of the Customs Act, 1962.
3. Bifurcation of duty demands for imported and indigenous goods.
4. Entitlement to relief for Cenvat debits upon cash payment.

Summary:

1. Legality of Utilizing Cenvat Credit:
The Appellant, a 100% EOU, cleared raw materials to DTA units and paid duty using Cenvat credit. The Department contested this, arguing that duty should be paid in cash (PLA debit). The Tribunal referenced previous case laws, notably *Matrix Laboratories Ltd* and *Hetero Labs*, which supported the Appellant's use of Cenvat credit for such payments. However, a contrary decision in *Divis Laboratories Ltd* mandated cash payment for customs duty on imported goods.

2. Applicability of Extended Period for Demand:
The Department invoked the extended period under Proviso to Section 11A(1) of Central Excise Act, 1944, and Section 28 of the Customs Act, 1962, alleging suppression of facts. The Tribunal found that the Appellant had informed the Department about clearances and paid the requisite duty, thus no suppression occurred. The Tribunal held that the demand for the extended period was not sustainable.

3. Bifurcation of Duty Demands:
The Tribunal bifurcated the duty demands into:
- Imported Inputs: Duty must be paid in cash (PLA debit) as per *Divis Laboratories Ltd*.
- Indigenous Goods: Duty can be paid using Cenvat credit as per *Matrix Laboratories Ltd*.

4. Entitlement to Relief for Cenvat Debits:
The Tribunal acknowledged that if the Appellant pays duty in cash, they are entitled to relief for the Cenvat debits already made. The Appellant can seek this relief from the appropriate forum.

Conclusion:
- The Appellant must pay duty in cash for imported inputs cleared to DTA.
- For indigenous goods, the Appellant can continue using Cenvat credit.
- The demand for the extended period is set aside.
- The Appellant is entitled to relief for Cenvat debits upon making cash payments.

Disposition:
The Appeals are disposed of accordingly, with directions for the Appellant to approach the relevant forum for relief concerning Cenvat debits.