CENVAT on GR-7 /TR-6 Challan

[Yatin Bhopi]

Sir we are manufacturer and regularly import duty free raw material under advance license. At the time of closer of advance license due to non fulfillment of export obligation (short export) we have paid applicable CVD and Addl. Duty as applicable with interest. We have original duty free bill of entry and now GR-7 challan for paid duties.  my query is:  Can we avail cenvat credit on GR-7 challan as per explanation of  rule  (b) 9 of CCR 2004.

[YAGAY and SUN]

Dear Yatin,

You raised a very good query.  Non fulfillment of export obligation within stipulated time attracts penal action and payment of duty along with interest at applicable rate. However, in our opinion, you may avail the CENVAT credit on the basis of GAR-7/T.R.-6, provided following the CENVAT credit Rules and utilization of material in manufacturing of dutiable/excisable goods.

Team YAGAY & SUN

TMI ID= 243506

M/s Whirlpool of India Ltd. Versus CCE, Delhi-IV (2014 (2) TMI 108 - CESTAT NEW DELHI )

Exemption under Notification No. 204/92-CUS dated 19/5/92 - Failure to meet the export obligation - Availment of CENVAT Credit - Whether the appellant would be eligible for Cenvat credit - Held that:- CRNGO steel sheets had been imported by the previous owner of the factory M/s Kelvinator of India Ltd. in 1993-94. At that time, the import was made free of duty against advance licences with export obligation. During 1995-96, the factories of M/s Kelvinator of India Ltd. were taken over by M/s Whirlpool of India Ltd. As per the Commissioner’s finding, the CRNGO steel sheets had been used in Ballabhgarh unit of M/s Kelvinator of India Ltd. for manufacture of Rotors and Stators and subsequently, the Ballabhgarh factory had been sold by new owners - (M/s Whirlpool of India Ltd.) to another company M/s Tecumseh India (P) Ltd. in 1997. Even if the customs duty alongwith additional customs duty in respect of the goods imported against advance licences free of duty by M/s Kelvinator of India Ltd. during 1993-94 was paid by the present appellant in 2002, they would be eligible for Cenvat credit of this additional customs duty, if and only if they have evidence to prove that the goods on which this duty had been paid had also been transferred by M/s Kelvinator of India Ltd. to them and had been used by them in the manufacture of excisable goods. If the goods imported by M/s Kelvinator of India Ltd. free of duty during 1993-94 were used by them (M/s Kelvinator) in the manufacture of Rotors and Stators prior to their factory having been taken over by the present appellant and, as such, the present appellant did not receive on transfer the stock of CRNGO steel sheets imported by M/s Kelvinator against advance licences, they (the appellant) would not be eligible for Cenvat credit, even if the duty on those goods was subsequently paid by them in 2002 for failure to meet the export obligation. But, if some quantity of steel sheets imported by M/s Kelvinator of India Ltd. had got transferred to M/s Whirlpool of India Ltd. (the appellant) when they took over the factories of M/s Kelvinator of India Ltd., and that quantity was used by them for manufacture they would be eligible for Cenvat credit of additional customs duty paid by them in 2002 on that quantity - Matter remanded back.

No. - Appeal No. 3471 of 2005

Order No. - Final Order No. 58689/2013

Dated - December 31, 2013

AI Summary

CENVAT credit entitlement requires proof of transfer and use of inputs before credit follows duty payment after export obligation failure.
CENVAT credit on duties paid under GAR-7/TR-6 for failure to fulfil advance licence export obligations is allowed only if the claimant complies with CENVAT rules and can prove that the specific inputs on which duty was paid were transferred to them and used in the manufacture of dutiable goods; mere payment of duty after taking over a factory does not create entitlement where the predecessor had already consumed the inputs.