By TIOL News Service

NEW DELHI, SEPT 02, 2013: THE appellant is availing CENVAT Credit on inputs received from 100% EOUs. According to the appellant, in respect of inputs received by them from a 100% EOU, duty had been paid under proviso to Section 3(1) of the Central Excise Act, 1944 read with S.No.1 of table annexed to Notification No. 23/03-CE dated 13.1.03 under which the rate of duty payable on the DTA clearance is the aggregate of duties of Customs and the special Additional Customs Duty leviable under Section 3A of Customs Tariff Act is exempt subject to fulfilment of the condition, which in this case has been fulfilled. The appellant had taken CENVAT credit of the Additional Customs duty component plus education cess of the total duty paid on the inputs received from 100% EOU. According to the department, the appellant should have restricted the Cenvat credit availment in terms of the formula prescribed in Rule 3(7)(a) of the CENVAT Credit Rules 2004. The appellant is before the CESTAT against the order passed by the Commissioner (Appeals).

The appellant argued that the provisions of Rule 3(7)(a) prescribing a formula for determining Cenvat credit available in respect of inputs received from a 100% EOU are applicable only when the inputs received, from a 100% EOU have suffered duty under S.No.2 of the Notification No. 23/2003, as all the provisions of this sub-rule are in respect of inputs received from 100% EOU on which the duty has been paid under S.No.2 of the table to the Notification No. 23/03-CE, that since in this case the inputs, had suffered duty under S.No.1 of the notification, the provisions of the rule 3(7)(a) are not applicable; that this plea was made before the original adjudicating authority as well as the first appellate authority, but the same was not considered and that in view of this, impugned order is not sustainable.

After hearing both sides, the CESTAT held:

On perusal of the 3(7)(a), it would be seen that while it is applicable in respect of units other than units which pay the customs duty under Section 3 of the Central Excise Act read with S.No. 3, 5, 6 and 7 of the Notification No. 23/2003, the formulas restricting the Cenvat credit have been prescribed only in respect of inputs cleared by a 100% EOU where the duty had been paid under S.No. 2 of the table annexure to the notification No.23/2003-CE.

Though the excise duty payable on DTA clearances of a 100% EOU paying duty under S. No. 2 of the table to the notification No. 23/03-CE has basic Customs duty component also, the Cenvat credit available is confined only to the component comprising of Additional Customs duty. Therefore on this basis, it can be said that though Rule 3(7)(a) does not mention any formula restricting, the credit, when the inputs received from a 100% EOU have suffered duty under S. No. 1 of the table to the notification No 23/03-CE i.e. duty paid on the goods is basic customs duty plus Additional Customs duty plus sp. additional customs duty if any payable plus education cess and S & H cess payable under section 93 of Finance Act, 2004 & Section 138 of Finance Act 2007 respectively, the Cenvat credit available would be confined only to the Additional Customs duty plus sp. additional customs duty if payable plus education and S & H cess.

Since no finding has been given on the Appellant's plea that the inputs received from the 100% EOU had suffered duty in terms of S. No. 1 of the table to the notification No.23/03-CE, the Tribunal remanded the matter to original authority to examine the plea.

(See 2013-TIOL-1299-CESTAT-DEL)