2011 (4) TMI 724 - AT - Central Excise

Tribunal rules in favor of appellant on CENVAT credit conversion issue

Sandoz Pvt. Ltd. Versus Commissioner of Central Excise Belapur

Sandoz Pvt. Ltd. Versus Commissioner of Central Excise Belapur - TMI Issues:1. Whether the appellant was required to reverse the CENVAT credit when conversion from DTA unit to 100% EOU took place.2. Whether the appellant could utilize the CENVAT credit for payment of duty in respect of their clearance to DTA unit.3. Applicability of relevant legal provisions such as Circular No. 77/99-Cus and Foreign Trade Policy on availing CENVAT credit by a 100% EOU.Analysis:1. The appellant, initially a DTA unit, converted into a 100% EOU without reversing the CENVAT credit available in their books. The impugned order demanded the reversal of the credit and imposed a penalty equal to the amount. The appellant argued that based on previous Tribunal decisions, they were not required to reverse the credit. The Tribunal, in line with the decision in Sun Pharmaceuticals Industries Ltd. case, concluded that the department cannot insist on the reversal of CENVAT credit if it has been utilized lawfully, thereby allowing the appeal.2. The dispute centered around whether the appellant could use the CENVAT credit for duty payment on clearances to the DTA unit. The appellant contended that since they were not permitted to use the credit for DTA clearances during the relevant period, the credit was available for the 100% EOU. The Tribunal agreed with the appellant's position, emphasizing that there were no provisions barring EOUs from availing CENVAT credit for duty payments, as highlighted in Waterbase Ltd. v. CCE, Guntur case.3. The learned DR argued against the appellant's position, citing Circular No. 77/99-Cus and provisions of the Foreign Trade Policy to support the contention that a 100% EOU cannot avail CENVAT credit. However, the Tribunal noted that the Circular was issued during the currency of the Central Excise Rules, 1944, which were rescinded. The Tribunal highlighted that at the material time, there were no provisions restricting EOUs from availing CENVAT credit, as supported by the decision in CCE, Rajkot v. Ashok Iron and Steel Fabricators case. The Tribunal, therefore, dismissed the arguments against the appellant's entitlement to the CENVAT credit.In conclusion, the Tribunal allowed the appeal, holding that the appellant was not required to reverse the CENVAT credit upon conversion to a 100% EOU and could utilize the credit for duty payments, as there were no legal provisions prohibiting such actions at the relevant time.