Tribunal Allows Gem Granites' CENVAT Credit Claim on High Speed Diesel

The Tribunal ruled in favor of Gem Granites, a 100% EOU, allowing them to claim CENVAT credit on High Speed Diesel (HSD) despite Rule 2(k) exclusion. Gem Granites' entitlement was supported by Notification No. 22/2003 exempting HSD procurement for EOUs from duty and Circular No. 799/32/2004-CX allowing refund under Rule 5 of CENVAT Credit Rules. The Tribunal emphasized compliance with the notification over the restrictive definition of input in Rule 2(k), rejecting the Revenue's arguments. Previous Tribunal decisions and case laws favored Gem Granites, leading to the dismissal of demands and penalties imposed by the Revenue in a judgment pronounced on 29/09/2016.

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Issues:
Demand of CENVAT credit on High Speed Diesel, interest, and penalty against Gem Granites.

Analysis:
The case involved Gem Granites, a 100% EOU, facing demands on CENVAT credit taken on High Speed Diesel (HSD) along with interest and penalties. Gem Granites argued that they were entitled to CENVAT credit under Circular No. 799/32/2004-CX, allowing EOUs to receive goods on duty payment and claim CENVAT credit. They procured HSD under Central Excise Tariff Act, 1985, and availed credit reflected in their returns. The Revenue issued show-cause notices disallowing credit based on Rule 2(k) of CENVAT Credit Rules, 2004, excluding HSD from the definition of input. Gem Granites cited Notification No. 22/2003 exempting EOUs from excise duty on specified goods, including fuel like HSD. They relied on case laws like Hindustan Unilever Ltd. vs. CCE and Commissioner of Central Excise vs. Jagmini Micro Knit Pvt Ltd to support their entitlement to CENVAT credit on HSD.

The main issue was whether Gem Granites, as a 100% EOU, could claim CENVAT credit on HSD despite Rule 2(k) exclusion. The Tribunal found Gem Granites eligible for credit under Notification No. 22/2003 exempting HSD procurement for EOUs from duty. The Circular No. 799/32/2004-CX further supported their right to claim refund under Rule 5 of CENVAT Credit Rules if credit remained unutilized. The Tribunal emphasized that the definition of input in Rule 2(k) could not restrict Gem Granites' entitlement when they were compliant with the notification. Previous Tribunal decisions reinforced Gem Granites' right to claim credit for HSD used as fuel. The Tribunal rejected the Revenue's argument based on Rule 2(k) and cited case laws like Imperial Granites Pvt. Ltd. and Sangam Spinners Ltd. as inapplicable to Gem Granites, an EOU, not a DTA industry.

In conclusion, the Tribunal allowed all appeals by Gem Granites, setting aside the demands and penalties imposed by the Revenue. The judgment was pronounced on 29/09/2016, in favor of Gem Granites.

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