Custom, Excise & Service Tax Tribunal
Sandoz Pvt. Ltd vs Belapur on 7 April, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO: E/2303/2006 (Arising out of Order-in-Original No: 65/COMMR./05-06 dated 24/02/2006 passed by the Commissioner of Central Excise, Belapur.) For approval and signature: Hon'ble Shri B.S.V. Murthy, Member (Technical) and Hon'ble Shri Ashok Jindal, Member (Judicial) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : No 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes Sandoz Pvt. Ltd. ...Appellant Vs Commissioner of Central Excise Belapur ...Respondent
Appearance:
Shri Prakash Shah, Advocate with Shri J.H. Motwani, Advocate for the appellant Shri S.M. Vaidya, Authorised Representative (JDR) for the respondent CORAM:
Hon'ble Shri B.S.V. Murthy, Member (Technical) and Hon'ble Shri Ashok Jindal, Member (Judicial) Date of hearing: 07/04/2011 Date of decision: 07/04/2011 ORDER NO: ....................................................
Per: B.S.V. Murthy:
The appellant was a DTA unit and got converted into a 100% EOU w.e.f. 14/07/2004. The appellant did not reverse the CENVAT credit available in the books of accounts at the time of conversion from DTA unit to 100% EOU. In the impugned order, it has been held that the appellant was required to reverse the CENVAT 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 learned DR submitted that the decision cited by the learned counsel are not applicable to the facts of this case. He submitted that, during the relevant time, the appellant was not allowed to utilise the CENVAT credit for payment of duty in respect of their clearance to DTA unit. When CEVAT credit cannot be utilised for the purpose of paying duty in respect of DTA clearance, such credit available in the books of account would be utilised by the 100% EOU. Further, the very fact that when utilisation is not permitted it mean availment is also not permitted. He submitted that the Commissioner has relied upon the Board's Circular No. 77/99-Cus dated 18/11/1999, according to which a 100% EOU will not avail CENVAT credit. Further, he submitted that the Commissioner has also cited the provisions of Foreign Trade Policy and according to them also, credit cannot be availed.
4. We have considered the submissions made by both sides. The issue before us is similar to the facts in the decision of the Tribunal in the case of Sun Pharmaceuticals Industries Ltd. (supra). The Tribunal after considering the issue in detail, came to the conclusion that the department cannot insist upon reversal of the CENVAT credit available in the books of accounts or recovery of the same if the same has been utilised. Since we are in full agreement with the reasoning adopted by the Tribunal in Sun Pharmaceuticals Industries Ltd. (supra), it would be appropriate to reproduce the relevant paragraphs of the said 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 and Rule 11 of CER alleged in the show cause notice has not occurred. Therefore, the consequential demand of cenvat credit relating to the inputs at the time of conversion of Sun into an EOU and the liability to penalties proposed did not exist. Therefore, the orders of the lower authorities are not sustainable.
7. In CCR'02, or CCR'04, there exist no provisions barring an EOU from availing cenvat credit of excise duty paid on inputs it received. Rule 100H of CER'44 made various rules including Rule 57A to Rule 57U of CER'44 inapplicable to an EOU. CER'44 have been rescinded. There is also no corresponding rule/provision in CCR'01 or CCR'02. CER'01 and CER'02 contain transitional provisions to the effect that any circulars, instructions, orders, trading notices or other orders issued under the CER'44 superseded by CER'01, or such orders etc issued under CER'01 superseded by CER'02, by the Board, and in force on the date the erstwhile rules were rescinded shall, to the extent they are relevant and consistent with the new set of rules shall be deemed to be valid. CBEC Circular No. 77/99-Cus., dated 18-11-99 is reproduced below :-
"Paragraph 9.28 of the EXIM Policy, 1997-2002 provides that existing DTA units may also apply for conversion into an, EOU/EHTP/STP but no concession in duties and taxes would be available under the scheme for plant, machinery and equipment already installed. In this connection, instances have come to the notice of the Board that such units 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."
This circular was issued during the currency of CER, 1944, which contained Rule 100H which disentitled an EOU to the Cenvat scheme. The CER, 1944 have been rescinded. Therefore, Circular No. 77/99 dated 18-11-99 has to be held to be no longer in force, in view of the transitional provisions contained in Rule 32 of CER, 2001.
8. We find that at the material time the CER or CCR did not contain any provision barring the 100% EOUs from availing cenvat credit or utilizing the same for payment of duty on excisable goods removed to the DTA or for payment of duty on goods exported under claim for rebate. Also there exists no bar for a DTA unit carrying over inputs and the cenvat credit balance in its accounts when it got converted into an EOU. We also observe that this Tribunal in Waterbase Ltd. v. CCE, Guntur reported in 2005 (187) E.L.T. 346 (Tri. - Bang.) had made the following observations.
"6. We have gone through the rival contentions. The appellants have informed their intention of taking Cenvat credit. The Department acknowledged the intimation sent by the appellants. In these circumstances, the appellants started taking credit. Therefore, there is no contumacious conduct on the part of the appellants warranting imposition of any penalty. Therefore the penalties imposed on the appellants and on Shri P. Ravi, General Manager are set aside. As regards the merits of the case, we find that there is no rule corresponding to the erstwhile Rule 100H of the 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 payment of duty in respect of clearance to DTA. Therefore, the demand of duty only is confirmed. As already stated, the penalties are set aside. However the demand of interest under Section 11AB is upheld."
The CBEC has since made good the deficiency in the rules noted by the Tribunal by providing for the EOUs to utilize the cenvat credit. In CCE, Rajkot v. Ashok Iron and Steel Fabricators reported in 2002 (140) E.L.T. 277 (Tri. - L.B.) cited by the Ld. Counsel for the appellants, this Tribunal held as follows :-
"A manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. Here, the credit has been validly taken and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product."
5. In view of the above position, all the points raised by the learned DR have been considered by the Tribunal in Sun Pharmaceuticals Industries Ltd. case and we do not find any merit in the submissions. Accordingly, the appeal is allowed with consequential relief to the appellants.
(Operative part Pronounced in Court) (Ashok Jindal) Judicial Member (B.S.V. Murthy) Technical Member */as 8 6