Can a 100% EOU procuring inputs without payment of duty utilize cenvat credit?

PJ/CASE LAW/2014-15/2490

Case:-MANEESH EXPORTS Vs CCE, BELAPUR

Citation:-2014-TIOL-2421-CESTAT-MUM

Brief Facts:- The applicant is seeking waiver of pre-deposit of duty, interest and penalties imposed against each of them in the impugned order.

Brief facts of the case are that the applicants are 100% EOU and procuring the inputs indigenously without payment of duty by claiming the benefit of Notification No. 23/2003-CE and 52/2003 Cus both dated 31.03.2003. The applicants cleared certain inputs as such and into DTA on payment of duty through CENVAT Credit account. The Revenue was of the view that as these inputs have not suffered any duty therefore, the applicant is not entitled to utilize CENVAT Credit account for payment of duty towards these clearances. As the demands pertains to Central Excise as well as Customs accordingly, impugned proceedings were initiated which were converted into impugned order. Aggrieved by the said order the applicant is in appeals.

Appellant’s Contention:- The learned Counsel for the applicant submits that Rule 17 of the Cenvat Credit Rules, 2004is relevant to the facts of this case which permits them to make payment through CENVATCredit account. He also relies on the decision in the case of CCE vs. Matrix Laboratories Ltd. –2012 (281) ELT 569 (Tri-Bang)which dealt with this issue. He also submits that as thedemands pertains to the period June 2008 to March 2012 and a show-cause notice came to beissued on 2^nd July 2013 by invoking extended period of limitation which is not sustainable asthey were filing their monthly returns regularly and showing their clearance by utilizingCENVAT Credit account. Lastly, the learned Advocate prays that as the unit has beenregistered under BIFR therefore, the applicant is facing financial hardship. He also pleadedthat it is a situation of revenue neutrality therefore stay be granted.

Respondent’s Contention:- On the other hand, the learned A.R. opposes the contentions of the learned Advocate andsubmits that as per sub Rule (4) of Rule 3 of Cenvat Credit Rules, 2004 if the applicant has notsuffered any duty on the inputs therefore, they have to pay duty on the clearance of the goodsthrough PLA. He further submits that the case law relied on by the learned Advocate is nothaving any relevance to the facts of this case as the same has been considered by theadjudicating authority in the impugned order. On limitation, he submits that as the applicantcleared certain inputs as such therefore they have suppressed the facts hence extended periodof limitation is correctly invoked.

With regard to the financial hardship the learned A.R. submits that the Tribunal should not consider the plea of the learned Advocate at this stage as the Revenue will not be able to recovery any amount from the applicant. Further he submits that it is not a case of revenue neutrality. In fact, if the applicant paid through PLA and then to claim refund of duty, they have to pass certain barriers to get the refund.

Reasoning of Judgment:- Considered the submissions made by both the sides.In this case Rule 17 of Central Excise Rules, 2002 deals with the situation which is reproduced here-in under:-

"17. Removal of goods by a Hundred per cent. Export-oriented undertaking for Domestic Tariff Area.

(1) Where any goods are removed from a hundred per cent. Export-oriented undertaking to domestic tariff area, such removal shall be made under an invoice by following the procedure specified in rule 11, (and the duty leviable on such goods shall be paid by utilizing the CENVAT credit or by crediting the duty payable to the account of the Central Government in the manner specified in rule 8.)

The said Rule clearly stated that for payment of duty on clearance of any goods the applicant being 100% EOU could utilize CENVAT Credit account. Therefore, prima facie the applicant has made out a case for waiver of the requirement of pre-deposit of Central Excise and Customs duty, interest and penalties. Accordingly, we grant waiver of the pre-deposit of the entire amounts adjudged in the impugned order and stay recovery thereof during the pendency of the appeals.

Decision:- Stay granted.

Comment:- The essence of this case is that when Rule 17 of CER, 2002 clearly states that for payment of duty on clearance of any goods, if the applicant is 100% Export Oriented Unit, they could utilize CENVAT Credit. Therefore, insistence by the revenue department to pay duty through PLA is not tenable.

Prepared By:Meet Jain

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PJ/CASE LAW/2014-15/2490

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