2012 (7) TMI 874 - CGOVT - Central Excise

EOU to DTA Conversion: Cenvat Credit Lapse Decision Upheld

The Government upheld the orders-in-original, rejecting the rebate claims filed by the unit post-debonding. The revision applications filed by the ... Denial of rebate claim - Payment of duty from unutilized CENVAT Credit - whether the rebate of “duties” actually paid out of the unutilized cenvat credit lying in balance with 100% EOU at the time of conversion to DTA Unit, on the goods exported by applicant, can be granted under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/04-C.E. (N.T.), dated 6-9-2004 - Held that:- When statutory provisions of Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 are read in proper perspective along with Instructions contained in Chapter 8 (Rule 8.4) of C. B. E. & C.’s Excise Manual of Supplementary Instructions then it becomes clear that rebate of duty paid at the time of clearance of export goods, is admissible. All the rebate claims under reference stands filed within the ambit and scope of above said provisions of law. In this case payment of duty is disputed as the same was paid from lapsed cenvat credit. The clarification by C.B.E. & C. Circular No. 77/99-Cus., dated 18-11-1999 (F. No. 305/128/99-FTT) is also applicable to instant case where 100% EOUs were converted into DTA Units. The CBEC Circular categorically states that cenvat credit lying in balance on the date of conversion would lapse and cannot be utilized after such conversion. Moreover, the Rule 10 of Cenvat Credit Rules, 2004 stipulates the situations where a manufacturer can transfer the unutilized cenvat credit to another unit. The said Rule does not permit transfer of unutilized cenvat credit lying in balance in case of conversion of an 100% EOU to DTA Unit. There is no statutory provision to allow transfer of such credit from 100% EOU to DTA Unit. As such it is rightly held by original authority that such credit has lapsed and cannot be utilized for payment of duty on goods exported by DTA Unit. - Decided in favour of Revenue. Issues Involved:1. Admissibility of rebate claims filed by a unit converted from 100% EOU to DTA.2. Validity and utilization of accumulated Cenvat credit post-debonding.3. Interpretation of statutory provisions and circulars governing Cenvat credit and rebate claims.Issue-wise Detailed Analysis:1. Admissibility of Rebate Claims Filed by a Unit Converted from 100% EOU to DTA:The primary issue is whether the rebate of duties paid from the unutilized Cenvat credit, accumulated during the period when the unit was a 100% EOU, can be granted under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. The adjudicating authority initially rejected the rebate claims on the grounds that the accumulated Cenvat credit lapsed upon conversion to a DTA unit. The Commissioner (Appeals) allowed the rebate claims, interpreting the provisions of the EXIM Policy, Cenvat Credit Rules, and relevant notifications to conclude that the credit did not lapse and was valid for utilization. However, the Government ultimately upheld the original adjudicating authority's decision, stating that the unutilized Cenvat credit lapsed upon conversion to a DTA unit and could not be used for payment of duty on exported goods.2. Validity and Utilization of Accumulated Cenvat Credit Post-Debonding:The Government noted that the statutory provisions and CBEC Circular No. 77/99-Cus., dated 18-11-1999, clarify that any unutilized Cenvat credit lying in balance at the time of conversion from a 100% EOU to a DTA unit lapses and cannot be utilized post-conversion. The Rule 10 of Cenvat Credit Rules, 2004, which governs the transfer of unutilized Cenvat credit, does not permit the transfer of such credit in cases of conversion from an EOU to a DTA unit. The Government found that the original authority correctly held that the credit had lapsed and could not be used for payment of duty on goods exported by the DTA unit.3. Interpretation of Statutory Provisions and Circulars Governing Cenvat Credit and Rebate Claims:The Government emphasized the importance of adhering to the ordinary and natural meaning of words in fiscal statutes, as observed by the Hon'ble Supreme Court in M/s. ITC Ltd. v. CCE and M/s. Paper Products Ltd. v. CC. The Government concluded that the provisions of the CBEC Circular dated 18-11-1999 and Rule 10 of the Cenvat Credit Rules, 2004, clearly indicate that the unutilized Cenvat credit lapsed upon conversion from a 100% EOU to a DTA unit. Therefore, the duty paid from such lapsed credit could not be treated as duty paid/collected under Section 3 of the Central Excise Act, 1944, making the rebate claims inadmissible under Rule 18 of the Central Excise Rules, 2002.Conclusion:The Government upheld the orders-in-original, rejecting the rebate claims filed by the unit post-debonding. The revision applications filed by the department succeeded, while those filed by the applicant exporter were rejected for lack of merit. The decision reaffirmed that the unutilized Cenvat credit lapsed upon conversion from a 100% EOU to a DTA unit and could not be utilized for payment of duty on exported goods.