Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Matrix Laboratories Ltd (Unit-7) on 30 December, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No . 27203 / 2013 Appeal(s) Involved: E/84/2007-SM [Arising out of Order-in-Appeal No. 60/2006 dated 16/10/2006 passed by Commissioner of Customs, Central Excise (Appeals-I), Hyderabad] Commissioner of Central Excise, Customs and Service Tax, HYDERABAD-I KENDRIYA SHULK BHAVAN, L.B STADIUM ROAD, BASHEERBAGH, HYDERABAD - 500004 Appellant(s) Versus M/s MATRIX LABORATORIES LTD (UNIT-7) PLOT NO.14, 19 & 100, CHEMICAL ZONE, IDA PASHAMYLARAM, MEDAK DISTRICT (A.P.). Respondent(s)
Appearance:
Ms. Sabrina Cano, Superintendent(AR) For the Appellant Mr. G. Venkat Rao, General Manager For the Respondent CORAM:
HONBLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER ________________________________________ Date of Hearing: 30/12/2013 Date of Decision: 30/12/2013 Respondent was a DTA unit before its conversion to 100% E.O.U. on 2.12.2003. During 2003-04, before conversion into 100% E.O.U., respondent took 50% of Cenvat credit of duty paid on the capital goods received in their factory prior to the date of conversion into 100% E.O.U. The respondent availed balance 50% of credit on capital goods in March 2005. Department have objected to this and entertained a view that the respondent is not eligible to take the balance 50% of credit on capital goods after conversion of DTA into 100% E.O.U. and proceedings were initiated which culminated in Order-in-Original dated 29.5.2006 ordering to recover Cenvat credit of Rs. 33,40,011/- with interest and also imposed penalty of Rs. 50,000/- under Rule 15(1) of the Cenvat Credit Rules, 2002. On appeal filed by the respondent, in the impugned order dated 16.10.2006, the Commissioner (Appeals) held that the respondent was rightly eligible to take credit. Revenue is in appeal against this decision.
2. Learned AR submits that according to paragraph 9.28 of the Foreign Trade Policy 1997-2002, existing DTA unit could apply for conversion into 100% E.O.U. but no concession in duties and taxes would be available under the Scheme for plant, machinery and equipment already installed. However if DTA unit had availed Cenvat credit on plant, machinery and equipment and utilized Cenvat credit taken of duty paid on capital goods before its conversion into 100% E.O.U., the same was not required to be demanded as per Circular issued by the Board. According to paragraph 6.37.1 of Foreign Trade Policy, as it existed during the relevant time, for conversion of DTA unit into 100% E.O.U., no concession of duty and taxes would be available for plant, machinery and equipment already installed. According to the Foreign Trade Policy as existed during the relevant time, the respondent unit converted into 100% E.O.U. and the Board Circular issued thereafter, if a DTA unit converted into 100% E.O.U. and even though already availed Cenvat credit on capital goods and utilized the same, the same would not be recovered. However, it is made clear in the Foreign Trade Policy as well as in the Boards Circular that no other concession would be available. The Boards Circular made it clear that no further concession is available when it is said that if the Cenvat credit has already been availed, the same need not be recovered but further credit would not be available. What emerges from the law and clarification is that if a unit gets converted into 100% E.O.U., they would not get any further concession in respect of the goods already installed.
3. What is to be taken note of is that prior to 6.9.2004, 100% E.O.U. was not eligible for Cenvat credit at all. With effect from 6.9.2004, provisions were made for providing benefit of Cenvat credit to 100% E.O.U. also in respect of the duty paid by them. The question is whether in terms of this provision, the respondent could have taken credit in 2004-05 being balance 50% of credit on capital goods. According to Rule 4 of Cenvat Credit Rules,2004, Cenvat credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year. The Rule further provides that the balance of Cenvat credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer. What it means is that in the first year, credit can be taken upto a maximum of 50% and balance 50% can be taken in any subsequent financial year. In this case, the respondent got converted into 100% E.O.U. in 2003 and therefore, the question that arises for answer is whether the respondent can be said to have become eligible for the first instalment of Cenvat credit in the year of receipt as provided under Rule 4 and if they were eligible, in my opinion, there would have no problem. In 2003-04 the respondent was ineligible for Cenvat credit on capital goods received in 2003-04 subsequent to conversion into 100% E.O.U. Therefore, whatever capital goods were available with the respondent are capital goods which were received prior to 2003-04, the first instalment of credit was not admissible. In view of the fact that Rule 4(b) of the Cenvat Credit Rules clearly provides that balance of Cenvat credit can be taken, what emerges, in my opinion, if a unit is eligible for first instalment, balance credit can be taken for the subsequent year. Therefore, when the respondent was not eligible to take credit at all in 2003-04, there is no balance left to be taken during the next year. The vested right gets created when first instalment of is taken in respect of the capital goods. Nevertheless, such vested right has to be considered when DTA unit was converted into 100% E.O.U. and not in any other manner.
4. The Commissioner (Appeals) has relied upon two decisions to support his conclusion. In the case of Hindustan Coco-cola Beverages Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai-III [2005 (187) E.L.T. 318 (Tri.-Mumbai)], the appellant was manufacturer of Maaza, a fruit juice product, which was exempted from 1.3.2001. Prior to that date, the appellant had obtained capital goods for use in the manufacture of final product Maaza and availed 50% of Cenvat credit on such capital goods during the year 2000-01 and took credit of remaining 50% in 2001-02 which was objected and denied. The Tribunal took the view that benefit of eligibility of remaining 50% of credit which was deferred has to be treated as deferred credit and therefore, in the subsequent year credit could have been taken even the final product Maaza seems to be dutiable. I have already observed above that only if the vested right has been created, the question of examining whether the same is entitled to the appellant for the next year. Therefore this decision, in my opinion, is not applicable to the facts of the present case. As regards the decision in the case of ACE Timez vs. Commissioner of C. Ex., Bangalore [2004 (187) E.L.T. 371 (Tri.-Bang.)], the appellant was a SSI unit and exemption notification issued for SSI unit specifically provides for availment of Cenvat credit of duty paid on capital goods even when exemption is being availed. Therefore, it may not be appropriate to apply the ratio of this decision to the facts of the present case.
5. At this stage, authorized representative of the respondent brought to my notice of the Tribunal decision in the case of GTN Exports Ltd. vs. C.C.E., Coimbatore [2009 (236) E.L.T. 110 (Tri.-Chennai)] and submits that in this case, it was held that an E.O.U. can take balance 50% of credit of duty paid on capital goods received in the previous fiscal when it was a DTA unit and continued as E.O.U. after conversion. Learned AR for Revenue further points out that in this case, the unit was a DTA till 18.11.2004 and on the date of conversion as a 100% E.O.U., it was eligible for Cenvat credit. Therefore, whatever the credit available to DTA was available to 100% E.O.U. also. Therefore, it can be said that vested right has been created even in respect of 100% E.O.U. since provisions of 100% E.O.U. as well as DTA are same. I find myself in agreement with this submission.
6. Even though, in my opinion, the respondent should not have been denied Cenvat credit on the capital goods to the extent of balance 50% of credit, I am unable to take a different view in view of the statutory provisions. Tribunal being a creation of statute cannot go beyond the statute. Therefore I can only sympathise with the assessee. In such a situation, the appeal filed by Revenue has to be allowed and accordingly, the same is allowed.
7. As regards penalty, in view of my opinion expressed above, I do not find any justification of penalty imposed on the respondent and accordingly, penalty is set aside.
(Pronounced and dictated in open court) (B.S.V. MURTHY) TECHNICAL MEMBER /vc/