Whether cenvat credit is allowed to DTA unit when EOU unit clears duty paid goods under notification 56/2002 to a DTA unit?

PJ/Case Law /2016-17/3382

Case- COMMISSIONER OF CENTRAL EXCISE, DELHI-III Versus ARCOTECH LTD.

Citation- 2016 (341) E.L.T. 297 (Tri. - Chan.)

Brief Facts- The facts of the case are that one M/s. Satya Metals a 100% EOU availed the benefit of Notification No. 56/2002-C.E., dated 14-11-2002 and cleared the goods in DTA as the unit is located in State of Jammu & Kashmir. As per the said Notification, the manufacturer-supplier who pays the duty from PLA is entitled to take refund of the same and the person who is paying duty on the goods manufactured by the said unit is also entitled to take the Cenvat credit of duty paid on the said goods. The respondent procured the goods manufactured by M/s. Satya Metals through second stage dealer and availed the Cenvat credit of duty paid on the said goods. The case was booked against the M/s. Satya Metals on the ground that as M/s. Satya Metals (100% EOU) was not entitled to avail the benefit of Notification No. 56/2002-C.E., dated 14-11-2002, in that circumstance, M/s. Satya Metals was not required to pay duty. Consequently, the respondent is not entitled to take Cenvat credit on the goods cleared by M/s. Satya Metals. A show cause notice was issued to the respondent to deny Cenvat credit by invoking extended period of limitation. The adjudicating authority denied the Cenvat credit to the respondent and demanded duty along with interest and equivalent amount of penalty was imposed on the respondent. The said order was challenged by the respondent before the ld. Commissioner (Appeals) who allowed the appeal filed by the respondent on the ground of limitation holding that as there was no mala fide intention to take Cenvat credit by the respondent, therefore, extended period of limitation is not invocable. Aggrieved from the said order, the Revenue is before Commissioner of Central Excise.
Appellant’s Contention- The ld. AR appearing on behalf of the Revenue submits that in this case, it is admitted fact that M/s. Satya Metals is on 100% EOU and it is not entitled for the benefit of Notification No. 56/2002-C.E., dated 14-11-2002. Therefore, they are not liable to pay duty on the goods cleared by them in DTA. Consequently, the duty paid by M/s. Satya Metals which was not to be paid, the respondent is not entitled to take Cenvat credit of the said duty, therefore, the impugned order is to be set aside.
Respondent’s Contention- The ld. AR appearing on behalf of the Revenue submits that in this case, it is admitted fact that M/s. Satya Metals is on 100% EOU and it is not entitled for the benefit of Notification No. 56/2002-C.E., dated 14-11-2002. Therefore, they are not liable to pay duty on the goods cleared by them in DTA. Consequently, the duty paid by M/s. Satya Metals which was not to be paid, the respondent is not entitled to take Cenvat credit of the said duty, therefore, the impugned order is to be set aside.
Reasoning of Judgement- On careful consideration of the arguments advanced by both the sides, The Hon’ble authority find that in the impugned order, the ld. Commissioner (Appeals) has held that extended period of limitation is not invocable, therefore, the proceedings against the respondent is barred by limitation. The said part of the order has not been challenged by the Revenue. In that circumstance, the Committee of Commissioners should not have proposed to file the appeal before this Tribunal without challenging the findings of the impugned order. Moreover, on merits also it is not disputed by the Revenue that the respondent has not paid the duty on the said goods. The duty has been paid by the respondent and as per Rule 3 of the Cenvat Credit Rules, 2004, the respondent is entitled to take Cenvat credit thereon.

Decision- Appeal Dismissed
Comment- The gist of the case is that if the manufacturer (EOU) supplies goods other than those specified in Annexure I of notification no 56/2002 to DTA unit, then he is liable to pay tax through PLA and entitled to get refund of the same. DTA unit will also allowed to get the Cenvat credit of the same because this will be purchase of input for further manufacturing. Therefore Cenvat allowed according to Rule 3 of Cenvat Credit Rules, 2004.
Prepared by- Akshit Bhandari

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PJ/Case Law /2016-17/3382

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