CENVAT credit carry-forward on DTA unit conversion to 100% EOU upheld; reversal not required absent express prohibition.

Unutilized CENVAT credit lying in the books of a DTA unit may be carried forward and utilized after conversion into a 100% EOU where the credit was validly earned and no express rule requires reversal on change of status. Tribunal decisions treated the issue as settled under the CENVAT Credit Rules, 2004 and Central Excise Rules, 2002, and the earlier circular suggesting lapse of credit was held inapplicable in the changed legal regime. The later amendment permitting EOUs to discharge duty through CENVAT account also supported continuation of the credit. The demand and penalties were set aside.

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Issues: Whether the unutilized CENVAT credit balance lying in the books of a DTA unit can be availed and utilized after its conversion into a 100% EOU.

Analysis: The question was treated as settled by consistent Tribunal decisions holding that, in the absence of any express prohibition in the CENVAT Credit Rules, 2004 or the Central Excise Rules, 2002, a converted 100% EOU is not required to reverse validly taken credit merely because the unit changed its status. The earlier circular suggesting lapse of unutilized credit was found inapplicable in the changed legal regime, and the later amendment enabling EOUs to discharge duty through CENVAT account supported the assessee's position. The EXIM Policy objection was not accepted as the credit had been lawfully earned under the credit rules and no rule barred its carry forward on conversion.

Conclusion: The unutilized CENVAT credit balance was admissible to the converted 100% EOU and could be utilized; the demand and penalties were unsustainable and were set aside in favour of the assessee.

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