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TMI Blog2009 (5) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... s, packing materials etc. On 22-4-2004, Sun was converted into a 100% Export Oriented Unit (EOU). Following a visit to the EOU, the officers of the department noticed that the EOU had received the entire balance of stock of inputs with Sun, at the time of its conversion to EOU without payment of duty equal to the credit availed at the time of receipt of the inputs. Rule 3(1) of the Cenvat Credit Rules, 2002 (CCR) permitted a manufacturer to take cenvat credit of the duty of excise paid on the inputs or capital goods received by him for use in or in relation to the manufacture of final products. Rule 3(4) of CCR provided that the manufacturer shall pay an amount equal to the credit availed in respect of such inputs or capital goods when remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Section 11AB of the Act. He imposed a penalty of Rs. five lakhs on Sun under Rule 13 of CCR and another penalty of Rs. 25,000/- under Rule 25 of CER. 3. Vide the impugned order, the Commissioner (A) upheld the order of the original authority except the penalty imposed under Rule 25 of CER. In the impugned order, the Commissioner (A) found that the instant case was not one of accrual of credit to EOU on procurement of inputs which had suffered duty. The instant case was one of conversion from DTA to EOU where the accumulated and unutilized credit on the date of conversion into an EOU would lapse. Further, in terms of Board s Circular No. 77/99-Cus., the accumulated and unutilized credit on the date of conversion of a DTA unit into an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires that the manufacturer shall pay an amount equal to the credit availed when inputs or capital goods are removed as such from the factory. Rule 11 of CER requires removal of goods under invoice. We find that the credit availed inputs were not removed in the instant case from the premises of Sun when Sun got converted into an EOU. Therefore, the contravention of provisions of Rule 3(1) and 3(4) of CCR and Rule 11 of CER alleged in the show cause notice has not occurred. Therefore, the consequential demand of cenvat credit relating to the inputs at the time of conversion of Sun into an EOU and the liability to penalties proposed did not exist. Therefore, the orders of the lower authorities are not sustainable. 7. In CCR 02, or CCR 04, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty on goods manufactured and cleared before its conversion into EOU/EHTP/STP, the same is not required to be demanded on its conversion into EOU/EHTP/STP. However, if the Modvat credit so availed of is lying in balance as unutilized on the date of conversion into EOU/EHTP/STP, it would lapse on conversion of DTA unit into EOU/EHTP/STP unit and cannot be utilized after such conversion. This circular was issued during the currency of CER, 1944, which contained Rule 100H which disentitled an EOU to the Cenvat scheme. The CER, 1944 have been rescinded. Therefore, Circular No. 77/99 dated 18-11-99 has to be held to be no longer in force, in view of the transitional provisions contained in Rule 32 of CER, 2001. 8. We find that at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that case, the appellant will not be in a position to utilize the Cenvat credit at all and it does not make any sense to allow him to take credit. The inconsistency between Cenvat Rules and Central Excise Rules can be removed only by the legislature. As such in view of the Rule 17 of the Central Excise Rules, the appellant cannot avail the credit taken by him for payment of duty in respect of clearance to DTA. Therefore, the demand of duty only is confirmed. As already stated, the penalties are set aside. However the demand of interest under Section 11AB is upheld. The CBEC has since made good the deficiency in the rules noted by the Tribunal by providing for the EOUs to utilize the cenvat credit. In CCE, Rajkot v. Ashok Iron and Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X
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