Cenvat Credit can be Utilized for Payment of Excise Duty Either on Finished Goods or Indigenous inputs: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Cenvat Credit can be utilized for payment of excise duty either on  finished goods or indigenous inputs.

The issue raised by Zydus Lifesciences Limited ,the appellant in the appeal is that whether the payment of duty by 100% EOU can be paid from cenvat credit account while debonding the 100% EOU unit. Shri Manish Jain, Counsel appearing on behalf of the appellant submitted that the show cause notice cannot be issued to 100% EOU without consultation with the jurisdictional development commissioner.

Demand is revenue neutral in terms of Section 142 of the CGST Act, 2017 for the reason that even if the appellant is asked to pay duty from cash, the duty debited from cenvat credit account will be refundable under Section 142 of the CGST Act, 2017, therefore, entire exercise is revenue neutral. I

Further submitted that duty payable on the removal of inputs procured by EOU indigenously or from other EOU duty free to DTA is a duty of excise, therefore, the same can be paid from cenvat. Rule 17 of Central Excise Rules, 2002 specifically entitles the appellant to utilize cenvat credit for payment of duty on DTA clearances.Shri Anand Kumar, Superintendent (AR) reiterated the finding of the impugned order.

At the time of de- bonding if there is any short fall of duty payment subsequent to the de- bonding of the unit, the custom/excise department is empowered to issue a show cause notice for which no approval of development commissioner is required for issuance of show cause notice, therefore, this submission of the appellant is not sustainable.

It was viewed that the appellant has utilized cenvat credit for payment of Additional duty of custom at the time of de-bonding of 100% EOU. In normal course when any goods are imported the additional duty of custom is paid in cash therefore there is no reason to avoid payment of additional custom duty of raw material as a custom duty in cash.

A single member bench comprising Mr. Ramesh Nair,Member (Judicial) held that “the cenvat credit can be utilized for payment of excise duty either on the finished goods or on the indigenous inputs. However, in case of imported inputs the additional duty of custom has to be paid in cash and not by debiting cenvat credit account in terms of Rule 3 of CCR, 2004.”

“(i)In case of imported inputs/raw material, the additional duty of custom shall be paid from cash and not from cenvat credit.

(ii)In case of duty liability on indigenous raw material and finished goods, since the duty is of excise the same shall be paid from cenvat account.

(iii)In case of payment of duty in cash as against the debit in cenvat account already made, the appellant is at liberty to recredit the same in their cenvat account and approach the department for refund in cash in terms of Section 142 of CGST Act and the same shall be disposed of in accordance with law.”, the Tribunal held.

The CESTAT  set aside the impugned order and allowed the appeal by way of remand to the Adjudicating Authority.

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