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Issues: (i) Whether CENVAT credit is allowable in respect of central excise duty paid on finished goods at the time of debonding of a 100% EOU and thereafter availed as credit by the DTA unit; (ii) Whether the demand raised by invoking the extended period of limitation is sustainable where debonding and payment of duty were in the knowledge of the Department and acknowledged by a No Dues Certificate.
Issue (i): Whether CENVAT credit is allowable on duty paid on finished goods at the time of debonding of a 100% EOU.
Analysis: The unit, upon debonding, paid appropriate excise duty on finished goods and thereafter became a DTA unit that used or held those goods as inputs for further manufacture or clearance. The Revenue did not point to any specific provision in the CENVAT Credit Rules that mandates denial of credit in such circumstances. Prior tribunal and Supreme Court authorities on the issue have recognized the availment of credit where duty was paid at debonding and the goods subsequently become inputs in the DTA unit.
Conclusion: CENVAT credit availed on finished goods in respect of duty properly paid at the time of debonding is allowable. Conclusion in favour of the assessee.
Issue (ii): Whether the demand confirmed by invoking the extended period of limitation is sustainable when debonding and duty payment were within departmental knowledge and acknowledged by a No Dues Certificate.
Analysis: The debonding and duty payment were officially recorded and acknowledged by issuance of a No Dues Certificate; there is no finding of suppression of facts by the assessee. Invocation of the extended period requires concealment or suppression; absent such concealment, the extended period cannot be sustained.
Conclusion: The demand raised by invoking the extended period of limitation is not sustainable. Conclusion in favour of the assessee.
Final Conclusion: The appellate authority allowed the appeal, set aside the adjudicating order denying CENVAT credit, quashed consequential interest and penalty, and granted consequential reliefs to the assessee.
Ratio Decidendi: Where a 100% EOU duly pays appropriate excise duty on goods at debonding and those goods thereafter become inputs for the DTA unit, the CENVAT Credit Rules do not permit denial of credit absent a specific rule or concealment justifying invocation of the extended period of limitation.
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