TaxTMI 
TaxTMI 
2026 (9) TMI 1376
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....the self-assessment scheme availing the CENVAT credit procedure under the CENVAT Credit Rules 2004 (CCR 2004). The assessee was earlier a 100% EOU manufacturing the same goods. Upon achieving positive NFE, it was permitted to exit the EOU scheme by the Development Commissioner, MEPZ, vide order dated 22.06.2011, on payment of applicable customs and excise duties on the imported/indigenous capital goods, inputs, consumables, semi-finished goods and finished goods. The unit thereafter became a DTA unit at the same premises and continued manufacture under Central Excise registration. The duties paid on debonding were transferred by the assessee to the DTA unit as CENVAT credit. It was noticed by the department that the assessee availed Rs.3,19,26,833/- as CENVAT credit (CVD + AED) in June 2011 on the de-bonded goods. Of the duties of Rs.63,32,532/- paid on capital goods, credit of Rs.1,16,214/- relating to imported machinery spares was considered ineligible by the department, leaving Rs.62,16,318/- as eligible capital-goods credit. The disputed credits were utilized for payment of duty on finished goods, predominantly exported, on which the assessee claimed rebate. Since the total reb....
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....bility of CENVAT credit but related to refund of 5% customs duty paid in excess at the time of de-bonding. The said refund had already been allowed by the Tribunal vide Final Order No. 40178-40180/2023 dated 17.03.2023. C. As regards the Rs.1,02,73,626/- pertaining to finished goods and Rs.1,16,214/- relating to imported machinery spares, the appellant submitted that the denial of credit was unsustainable. Insofar as imported spares were concerned, the reliance on the decision in AVO Carbon (supra), was misplaced, as the said decision stood overruled by the Hon'ble Madras High Court in Stanadyne Amalgamations (P) Ltd. Vs CCE and AVO Carbon (India) Pvt. Ltd. v. CCE [2019 (8) TMI 572], wherein credit was held admissible on both imported and indigenous inputs/capital goods. The Revenue's appeal and the consequential demand relating to imported spares were therefore liable to be rejected. D. With regard to credit on finished goods, reliance was placed on the decisions of the Tribunal in Annur Cotton Mills Vs. CCE, Coimbatore, 2023 (6) TMI 1106 and Mideast Integrated Steels Ltd. Vs CCE, 2026 (1) TMI 1508, wherein such credit was held admissible. E. In view of ....
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....ials lying in stock and capital goods on depreciated value as per Rules which were procured and imported without payment of duty when it was 100% EOU and after De-bonding on 232-2012, it became liable to pay such duties in accordance with Notification No. 22/2003-C.E. (N.T.), dated 31st March, 2003. 3. The question involved in the present cases is as to whether such duties paid by the assessee upon Debonding can be availed as Cenvat credit under Rule 3(1) of Cenvat Credit Rules, 2004 against its Output Duty liability, or not in terms of para 8 of Notification No. 22/2003, dated 31-3-2003. ***** ***** ***** 11. There is also no dispute that the duties in question were paid by the assessee on such De-bonding on 23-22012, however, not adopting the procedure for payment through TR 6 Challan Forms. A careful reading of Rule 3 would establish that the purpose of giving Cenvat credit for which various duties paid as enumerated in 11 Clauses of Rule 3 is to give set off for the duties paid on Inputs or Input Services including the Duties, Taxes or Cess as enumerated in 11 Clauses is to remove the cascading effect of duties which concept is at the bottom of Cenvat....
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.... is in fact only an enabling provision to allow Cenvat Credit or rather the only provision for that purpose. 14. The whole of the Rule 3(1) is the enabling provision for giving such Cenvat credit and the Proviso therein inserted later on by Notification No. 35 of 2008, dated 249-2008 cannot be said to be a standalone enabling power to provide such Cenvat credit to the assessee. Such a novel and out of context interpretation of the said Proviso, which, we feel is not only not happily worded, but also, placed at the wrong place in Rule 3(1), cannot be accepted to defeat the very purpose of Rule 3(1) upon an 100 EOU, when converted upon De-bonding to a DTA. ***** ***** ***** 18. There is no dispute or quarrel on the legal proposition on how to interpret a later on inserted Proviso in an enactment. But, what we are looking at is the insertion of Proviso in Rule 3 of Cenvat Credit Rules, 2004 which we find it to be more in the nature of an Explanation clarifying what was in doubt earlier viz., about allowing of Cenvat credit in respect of capital goods earlier. The allowing of Cenvat credit on raw material was never in doubt whether on debonding or otherwise o....
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....EOU and conversion to DTA unit, could be transferred to the DTA unit and be utilised by the said unit. Following the principle consistently laid down by the Tribunal in aforesaid cases, we do not find merit in the impugned order, which is contrary to the said precedents. 6. Consequently, the same is set aside and the appeal is allowed with consequential relief, if any, as per law." (emphasis added) 9. In the light of the above decisions, the eligibility to credit has to be examined with reference to the position obtaining after de-bonding. The circumstance that the goods had originally been procured or held without payment of duty while the appellant was operating as an EOU does not, by itself, disentitle the appellant from taking credit of the duty subsequently paid at the time of de-bonding. Upon de-bonding and payment of the assessed duty, the goods became duty-paid goods available to the appellant as a DTA manufacturer. The subsequent availment of credit is therefore referable to the duty actually paid at the time of de-bonding and not to the earlier duty-free procurement of the goods under the EOU scheme. 10. Rule 3 of the CENVAT Credit Rules, 2004 is the sub....