2024 (1) TMI 932 - AT - Central Excise

Debonding of 100% EOU - Validity of Show cause notice - Utilization of CENVAT Credit - payment of duty by 100% EOU can be paid from cenvat credit account while debonding the 100% EOU unit - HELD THAT - At the time of de-bonding if there is any short fall of duty payment subsequent to the de-bonding of the unit, the custom/excise department is empowered to issue a show cause notice for which no approval of development commissioner is required for issuance of show cause notice, therefore, this submission of the appellant is not sustainable. Refund claim - amount paid from cenvat credit is otherwise refundable under Section 142 of CGST Act, 2017 or not - HELD THAT - There is proper mechanism for filing refund claim and considering the merit of each case the sanctioning authority of GST department shall dispose of the refund, therefore, at this preliminary stage it cannot be decided that since the appellant can claim the refund of cenvat credit, the entire case is revenue neutral. However, the appellant have liberty to approach the GST authority to claim the refund, if any, in accordance with law. The cenvat credit can be utilized for payment of excise duty either on the finished goods or on the indigenous inputs. However, in case of imported inputs the additional duty of custom has to be paid in cash and not by debiting cenvat credit account in terms of Rule 3 of CCR, 2004 - the matter needs to be re-considered by the Adjudicating Authority - Appeal allowed by way of remand.

Summary

Issues Involved:
Whether duty by 100% EOU can be paid from cenvat credit account while debonding the unit.

Comprehensive Details:

Issue 1:
The appellant argued that a show cause notice cannot be issued to a 100% EOU without consultation with the jurisdictional development commissioner, citing relevant judgments. However, the Tribunal found that the custom/excise department can issue a show cause notice for duty shortfalls post de-bonding without the commissioner's approval, making the appellant's argument unsustainable.

Issue 2:
The appellant contended that utilizing cenvat credit for duty payment is revenue neutral under Section 142 of the CGST Act, 2017, as refundable. The Tribunal acknowledged the refund mechanism but stated that claiming refund is subject to the GST authority's decision, thus not automatically ensuring revenue neutrality. The appellant was advised to seek refund through proper channels.

Issue 3:
Regarding duty payment on inputs procured by EOU, the Tribunal clarified that cenvat credit can be used for excise duty on indigenous inputs or finished goods. However, for imported inputs, additional custom duty must be paid in cash, not from cenvat credit, as per Rule 3 of CCR, 2004. The Tribunal outlined specific guidelines for payment methods based on the nature of the duty.

Conclusion:
The Tribunal set aside the impugned order and remanded the case to the Adjudicating Authority for reconsideration based on the clarified guidelines regarding duty payment methods. The appellant was granted the liberty to recredit the cash-paid duty to their cenvat account and seek a refund through proper procedures as per the law.

*( Pronounced in the open court on 11.09.2023 )*