Cenvat credit carry forward for converted EOU upheld under the post-amendment regime, despite Revenue's circular-based objection

A unit converted from a DTA unit into a 100% EOU could carry forward and utilise unutilised Cenvat credit on inputs and capital goods because the conversion occurred after the 06.09.2004 amendment, under which EOUs could pay duty through PLA as well as Cenvat credit. The Tribunal view supporting continuity of such credit was treated as applicable, and the departmental circular relied on by Revenue did not override that position. The carry forward of the credit was therefore considered permissible, and the Revenue objection was rejected.

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Issues: Whether an assessee converted from a DTA unit into a 100% Export Oriented Unit could carry forward and utilise the unutilised Cenvat credit balance on inputs and capital goods, and whether the departmental circular required lapse of such credit.

Analysis: The conversion took place after the relevant rule had been amended with effect from 06.09.2004, under which EOUs were permitted to pay duty from the PLA as well as from the Cenvat credit account. The unit was converted into a 100% EOU only on 27.12.2006, and therefore the post-amendment regime applied. The reliance placed by the lower authority on the Tribunal decision allowing such credit was found apt, and the Board circular cited by Revenue did not dislodge that position.

Conclusion: The carry forward of the unutilised Cenvat credit on both inputs and capital goods was held to be permissible, and the Revenue's objection was rejected.

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