2011 (4) TMI 724

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....ENVAT credit when conversion from DTA unit to 100% EOU took place and accordingly the amount of credit available at the time of conversion has been demanded and penalty equal to the amount of credit has been imposed.   2. On behalf of the appellant, Shri Prakash Shah, learned advocate submitted that the issue is no longer res integra and relied upon the decisions of the Tribunal in the cases of Sun Pharmaceuticals Industries vs. Commissioner of Central Excise, Pondicherry 2010 (251) 312 (Tri.-Chennai); GTN Exports Ltd. vs. Commissioner of Central Excise, Coimbatore 2009 (240) ELT 53 (Tri.-Chennai) and Commissioner of Central Excise, Rajkot vs. Ashok Iron & Steel Fabricators 2002 (140) ELT 277 (Tri.- LB).   3. However, the learne....

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....id decision:   "6. We have carefully considered the case records and the submissions by both sides. We find that Sun had not violated the provisions of Rule 3 (1) and 3(4) of CCR and Rule 11 of CER as proposed in the show cause notice, as it had availed cenvat credit of excise duty paid on inputs in accordance with law. Rule 3(4) requires that the manufacturer shall pay an amount equal to the credit availed when inputs or capital goods are removed as such from the factory. Rule 11 of CER requires removal of goods under invoice. We find that the credit availed inputs were not removed in the instant case from the premises of Sun when Sun got converted into an EOU. Therefore, the contravention of provisions of Rule 3(1) and 3(4) of CCR a....

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....ts on their conversion into EOUs have been asked to reverse the Modvat Credit already availed of, on plant and machinery procured by them prior to their conversion into EOUs.   The matter has been examined. It is clarified that if the DTA unit has availed of the modvat credit on plant, machinery and equipment and also utilized such credit for payment of duty on goods manufactured and cleared before its conversion into EOU/EHTP/STP, the same is not required to be demanded on its conversion into EOU/EHTP/STP. However, if the Modvat credit so availed of is lying in balance as unutilized on the date of conversion into EOU/EHTP/STP, it would lapse on conversion of DTA unit into EOU/EHTP/STP unit and cannot be utilized after such conversion....

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.... Central Excise Rules, 1944. The interpretation that there is no prohibition for 100% E.O.U. to take Cenvat credit appears to be correct. However, in view of Rule 17 of the Central Excise Rules, the duty should be paid by a 100% E.O.U. only through account current. Account current refers to PLA. In view of this position, the appellant cannot pay duty through Cenvat credit. In that case, the appellant will not be in a position to utilize the Cenvat credit at all and it does not make any sense to allow him to take credit. The inconsistency between Cenvat Rules and Central Excise Rules can be removed only by the legislature. As such in view of the Rule 17 of the Central Excise Rules, the appellant cannot avail the credit taken by him for payme....