Cenvat credit on 100% EOU DTA clearances allowed where exemption was not availed, and the demand was time-barred.

Cenvat credit was held admissible on duty paid by a 100% EOU on DTA clearances where the supplier had not availed the benefit under Serial No. 2 of Notification No. 23/2003-CE, because the duty remained excise duty under Section 3 of the Central Excise Act, 1944 and could not be treated as customs-duty credit for denial purposes. The demand was also held time-barred, as the credit was reflected in the records and no suppression of facts or wilful misstatement with intent to evade duty was established, so the extended limitation period could not be invoked. Consequently, the adverse order was set aside with consequential relief.

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Issues: (i) Whether Cenvat credit of the duty paid by a 100% EOU on clearances to the Domestic Tariff Area was admissible to the receiver when the supplier had not availed the benefit under Serial No. 2 of Notification No. 23/2003-CE dated 31.03.2003. (ii) Whether the demand was barred by limitation.

Issue (i): Whether Cenvat credit of the duty paid by a 100% EOU on clearances to the Domestic Tariff Area was admissible to the receiver when the supplier had not availed the benefit under Serial No. 2 of Notification No. 23/2003-CE dated 31.03.2003.

Analysis: Duty paid by a 100% EOU on DTA clearances is duty of excise under Section 3 of the Central Excise Act, 1944. The restriction under Rule 3(7)(a) of the Cenvat Credit Rules, 2004 operates only where the supplier has taken the benefit contemplated by Serial No. 2 of Notification No. 23/2003-CE. As the supplier had not availed that exemption, the credit could not be denied on the footing that the amount represented customs duty. The duty was a single excise duty and the receiver was entitled to credit.

Conclusion: The credit was admissible and the denial of Cenvat credit was unsustainable.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The relevant period was April 2009 to April 2010, whereas the show cause notice was issued on 28.04.2014. The credit was reflected in the records and no suppression of facts or wilful misstatement with intent to evade duty was established.

Conclusion: The demand was time-barred and the extended period could not be invoked.

Final Conclusion: The appellant succeeded on both the credit issue and limitation, and the adverse order was set aside with consequential relief.

Ratio Decidendi: Cenvat credit on clearances from a 100% EOU cannot be denied as customs-duty credit where the supplier has not availed the exemption under Serial No. 2 of Notification No. 23/2003-CE, and limitation cannot be extended absent suppression or wilful misstatement.

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