By TIOL News Service

MUMBAI, SEPT 03, 2015: THE appellant, a Domestic Tariff Area Unit was converted into 100% EOU with effect from 04.07.2007. At the time of conversion from DTA unit to 100% unit, appellant had unutilised balance of Cenvat credit amounting to Rs. 120,89,756/-. Revenue's contention is that the said amount of unutilised credit will stand lapsed in view of the Board Circular No. 77/99- Cus dated 18.11.1999.

A SCN came to be issued on 26.06.2012 proposing to recover the said amount by invoking the extended period of limitation, recovery of interest and also penalty.

The CCE, Raigad adjudicated the case in August 2013 confirming the demand and, therefore, the appellant is before the CESTAT.

It is submitted that there is no provision under the CCR which provides for lapsing of Cenvat Credit on conversion of DTA unit to 100% EOU; that even 100% EOUs can procure goods on payment of duty and avail the Cenvat Credit; scn is time barred. Following case laws were cited in support - Sandoz Pvt. Ltd. - 2011-TIOL-673-CESTAT-MUM, Matrix Laboratories Ltd. - 2014-TIOL-2090-CESTAT-MUM

The AR placed reliance on the decision in Indira Gandhi Mahila Sahakari Soot Girni Ltd. where it is held that on conversion from DTA unit, modvat scheme is not applicable. In the matter of limitation support is drawn from the decision in Union Quality Plastic Ltd. - 2013-TIOL-1072-CESTAT-AHM-LB.

The Bench observed that the issue has already been decided in favour of the assessee by the Tribunal in the case of Sandoz Pvt. Ltd. vs. CCE - 2011-TIOL-673-CESTAT-MUM and which has been upheld by the Bombay High Court. Further, based on the said judgement, the Tribunal in the case of Matrix Laboratories Ltd. vs. CCE - 2014-TIOL-2090-CESTAT-MUM has also taken similar view. Inasmuch as there is no merit in the contention of the Revenue.

After extracting paragraph 5.1 of the said decision, the Bench added that the Board Circular no. 77/99-Cus quoted does not elaborate under what provision the unutilised credit will stand lapsed; moreover the said circular was issued when Rule 100H under old CER, 1944 were existing and at that point of time 100% EOU were outside the scheme of modvat/Cenvat Credit, which is not so after the CENVAT CCR, 2004 have come into existence.

The Tribunal distinguished the case laws cited by the AR by holding that the facts involved were different and that they pertain to the time when old rules were in force. Noting that even on limitation the appellant had a strong case since all the details were provided to the department when the unit got converted into EOU, in the year 2007, the appeal was allowed both on merits as well as limitation.

(See 2015-TIOL-1859-CESTAT-MUM)