Custom, Excise & Service Tax Tribunal
M/S. Texbond Nonwovens vs Cce, Pondicherry on 19 January, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/99/2011
(Arising out of Order-in-Appeal No. 184/2010 (P) dated 08.12.2010 passed by the Commissioner of Central Excise (Appeals) Chennai).
M/s. Texbond Nonwovens : Appellant
Vs.
CCE, Pondicherry : Respondent
Appearance Shri R. Sai Prashanth, Advocate, for the Appellant Shri K.P. Muralidharan, AC (AR) for the Respondent.
CORAM:
Honble Ms. Sulekha Beevi, Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing/Decision: 19.01.2018 FINAL ORDER No. 40332/2018 Per Bench Brief facts are that the appellants are engaged in the manufacture of Non-woven fabrics. The raw materials namely PP Spun granules purchased from Reliance Industries Ltd. (RIL), which is a 100% EOU. RIL supplied the granules on payment of excise duty under sl.no. 2 of Notification No. 23/2003-CE dated 31.02.2003. The department was on the view that the appellant is not eligible to avail Cenvat credit on the Education cess and Higher education cess paid on CVD as well as the Education cess and Higher education cess paid for the third time. SCNs were issued proposing to disallow the credit and to recover the same along with interest and also to impose penalties. After due process of law, the original authority confirmed the demand, interest and penalties. In appeal, the Commissioner (Appeals) upheld the demand and interest and however set aside the penalty. Hence, the appellants are before the Tribunal.
2. On behalf of the appellants, Ld. Counsel Shri R. Sai Prashanth submitted that the issue whether appellant is eligible to avail credit on education cess and secondary and higher education cess when inputs are supplied by 100% EOU paying duty under sl.no. 2 of Notification No. 23/2003-CE dated 31.03.2003 is settled by the decisions of the Tribunal in the case of Emcure Pharmaceuticals Ltd. Vs. CCE -2008 (225) ELT 513 (Tri.-Mum.) and CCE Vs. Jumbo Bags Ltd. 2013 (296) ELT 142 (Tri.-Chen.). He further submitted that the said decision was followed in the case of CCE Vs. Khanna Paper Mills Ltd. 2015 (326) ELT 167 (Tri.-Del.), wherein it was held that the credit is available on CVD component.
3. The Ld. AR, Shri K.P. Muralidharan, AC, reiterated the findings in the impugned order.
4. Heard both sides.
5.1 The short issue to be decided is that the issue whether appellant is eligible to avail credit on education cess and secondary and higher education cess when inputs are supplied by 100% EOU paying duty under sl.no. 2 of Notification No. 23/2003-CE dated 31.03.2003 is set at rest by the decisions of the Tribunal in the case of Emcure Pharmaceuticals Ltd. Vs. CCE -2008 (225) ELT 513 (Tri.-Mum.) and CCE Vs. Jumbo Bags Ltd. 2013 (296) ELT 142 (Tri.-Chen.). He further submitted that the said decision was followed in the case of CCE Vs. Khanna Paper Mills Ltd. 2015 (326) ELT 167 (Tri.-Del.), wherein it was discussed as under:-
6.?For proper appreciation of the issue the relevant provision is noticed as under.
Rule 3(7). - Notwithstanding anything contained in sub-rule (1) and sub-rule (4), -
(a)?CENVAT credit in respect of inputs or capital goods produced or manufactured by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or in a Software Technology Park other than a unit which pays excise duty levied under Section 3 of the Excise Act read with serial numbers 3, 5, 6 and 7 of Notification No. 23/2003-Central Excise, dated the 31st March, 2003 ----in case the unit pays excise duty under Section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount calculated in the following manner, namely :-
Fifty per cent of X multiplied by (1+BCD/100) multiplied by (CVD/100)}, where BCD and CVD denote ad valorem rates, in per cent of basic customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value :
Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under Section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise, dated 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] shall be equal to X multiplied by (1+BCD/400) multiplied by (CVD/100)}.
7.?As per proviso to Section 3(1) of Central Excise Act, 1944, if the goods are manufactured by an EOU and brought to any place in India, the excise duty levied shall be equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 on like goods produced or manufactured outside India if imported to India. The aggregate duties of Customs include Basic Customs Duty and Additional Customs duty. The Additional duty of customs in turn is equal to excise duty leviable on goods manufactured in India. Thus this Additional Duty of Customs (CVD) includes within it, Education Cess and SHE cess. All manufacturers, including EOU, are required to pay other duties of excise levied under different Acts like the Additional duty of Excise under Textiles and Textile Articles Act, Goods of Special Importance Act, NCCD, Education Cess and SHE Cess. Under the Notification No. 24/2003 (ibid) the levy of additional duty of excise under Textiles & Textile Articles Act and Goods of Special Importance Act are exempted when cleared from EOU. Consequently the other levies of NCCD, Education cess and SHE cess are applicable. The respondents have purchased Petroleum Coke from RIL, a 100% EOU by paying duty under Sr. No. 2 of Notification No. 23/2003 (ibid).
8.?When goods have been removed from EOU to DTA, availing the exemption under Sr. No. 2 of Notification No. 23/2003 (ibid) there is a restriction carved out by the formula provided in the proviso to Rule 3(7)(a). This restriction is to prohibit taking credit on the BCD component. But credit is available on the Additional Customs duty (CVD) component. As already stated, Additional Customs duty includes excise duty as well as cess on this excise duty. Therefore the respondents are entitled to take credit of an amount equivalent to the Additional Customs Duty inclusive of excise duty and cess thereon.
9.?The position has been well clarified and settled in Emcure Pharmaceuticals Ltd. v. CCE - 2008 (225) E.L.T. 513 (Tri.-Mum.). The respondents also relied on the judgments rendered in Jai Corp Ltd. v. CCE - 2014-TIOL-2518-CESTAT-AHM = 2015 (317) E.L.T. 489 (Tri.-Ahmd.), CCE v. Aarti Industries Ltd. - 2014-TIOL-1638-CESTAT-AHM = 2014 (307) E.L.T. 553 (T), Shreya Pets Pvt. Ltd. v. Commissioner - 2009 (240) E.L.T. 408 (Tri.-Bang.), CCE v. Jambo Bags Ltd. - 2013 (296) E.L.T. 142 (Tri.-Mad.). 5.2. Following the above judgments, we are of the view that the credit availed on education cess and secondary, higher education cess on the CVD portion is eligible. The demand raised on this count cannot sustain and requires to be set aside, which we hereby do.
5.3 The second issue for consideration is the education cess on CVD paid for the third time. The said issue has been discussed in the case of Polypack Industries Vs. CCE 2015 (327) ELT 568 (Tri.-Bang.). Following the above judgment, we hold that the credit availed on the education cess paid for the third time by the appellants on the CVD portion is eligible. The demand made on this count cannot sustain and requires to be set aside, which we hereby do.
5.4 Ld. Counsel has been fair enough to concede that the appellants had availed excess credit on the CVD portion. The demand in respect of excess availed credit is not contested by the appellants. The said amount has already been reversed by the appellant before utilization. Applying the ratio laid by the Honble High Court of Madras in the case of CCE, Madurai Vs. Strategic Engineering Pvt. Ltd. 2014 (310) ELT 509 (Mad.), we are of the view that the excess credit availed by the appellant having been reversed, no interest or penalty liable to be paid.
6. From the above discussions, the impugned order to the extent of eligible credit as discussed above is set aside. Appeal is allowed with consequential reliefs.
(Operative part of the Order pronounced in the open Court)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
BB
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