By TIOL News Service

MUMBAI, OCT 07, 2015: THE appellants converted their EOU into DTA unit on 08.08.2011. On conversion into DTA unit, the appellant had discharged the applicable duties on the inputs in stock, inputs contained in finished goods and Work in Progress (WIP) due to the reason that being a EOU they had received inputs without payment of duty. After reversing/paying the duty on conversion to DTA there was a carry-over of unutilized credit lying in balance.

This credit was utilized towards discharge of the duty liability in respect of goods cleared from DTA unit. This was objected to by the department and resultantly a SCN was issued directing the appellant to show cause as to why CENVAT credit so carried forwarded to DTA unit be not held as lapsed and an amount of Rs.1,05,98,681/- utilized/paid by them on clearances made to DTA through such CENVAT credit be not demanded with interest.

The CCE, Pune-III confirmed the demand. He held that the provisions of Rule 11 of CCR, 2004 will be attracted and the credit lying in balance when the appellant switched over from EOU to DTA need to lapse as the appellant's final product "agricultural tractors" were fully exempted with effect from 01.03.2006.

After considering the submissions made by both sides, the Bench observed -

+ We find from the impugned order that the adjudicating authority has not disputed the fact that the appellant utilized the carried forward CENVAT credit towards discharge of their duty liability in respect of goods i.e. aggregates, components and parts of tractors. This undisputed facts would mean that the appellant herein was not manufacturing only exempted agricultural tractors but was also manufacturing other products on which duty liability arises.

+ It can be seen from bare perusal of the sub-rule (11(3) of CCR, 2004) that the same will apply only in a situation where final products are exempted and lying in stock. In our considered view, the above sub-rule may not be applicable in the facts of this case which is not disputed that there is a discharge of Central Excise duty liability on the other finished products manufactured and cleared like aggregates, components & parts of tractors.

After distinguishing the case laws cited by the AR, the CESTAT held that the impugned order is unsustainable and liable to be set aside.

The appeal was allowed.

In passing: Also see 2015-TIOL-1859-CESTAT-MUM - Privi Organics Ltd.

(See 2015-TIOL-2133-CESTAT-MUM)