Accumulated Cenvat credit may carry forward on EOU to DTA conversion absent an express prohibition under the rules.

Accumulated Cenvat credit lying unutilised in the books of a 100% EOU on de-bonding and conversion into a DTA unit is stated to be capable of being carried forward and utilised by the converted unit where there is no express prohibition in the Cenvat Credit Rules, 2004. The text relies on Rule 10 and the absence of any specific exclusion to support the view that the balance credit does not automatically lapse on change of status. It further notes that this gives the assessee a strong prima facie case against demand, penalty and recovery, and supports waiver of pre-deposit.

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Issues: Whether accumulated Cenvat credit lying unutilised in the books of a 100% EOU on de-bonding and conversion into a DTA unit could be carried forward and utilised by the DTA unit, and whether pre-deposit should be waived.

Analysis: The Cenvat Credit Rules permit EOUs and DTA units to avail and utilise Cenvat credit of duty paid on inputs and input services. Rule 10 of the Cenvat Credit Rules, 2004, does not contain any express prohibition against carrying forward accumulated credit when an EOU is converted into a DTA unit. The absence of a specific exclusion, together with the Tribunal's earlier approach in analogous conversion situations, supported the view that the balance credit could not be treated as having lapsed at the stage of de-bonding. On that basis, the appellants were found to have shown a strong prima facie case against the demand of lapse, penalty and recovery.

Conclusion: The credit was held, prima facie, to be capable of being carried forward and utilised, and unconditional waiver of pre-deposit was granted in favour of the assessee.

Ratio Decidendi: In the absence of an express statutory prohibition, accumulated Cenvat credit is not to be denied merely because a unit changes status from EOU to DTA.

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