EOU is required to Pay Excise Duty only by way of Cash and Cenvat Credit cannot be Utilized when Raw Materials/Inputs are Cleared: CESTAT [Read Order]

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the Export Oriented Units (EOU) are required to pay excise duty only by way of cash and Cenvat credit cannot be utilized when raw materials/ inputs cleared.

The Appellant, Matrix Laboratories Ltd, is the manufacturer of various pharma products and is registered as 100% EOU. For the raw materials imported by them, they are availing the benefit of Notification No. 52/2003-CUS dt.31.03.2003 wherein Customs Duty concessions are available to them. Similarly, in respect of indigenously procured raw materials, consumables etc., they are availing the exemption provided under Notification No. 22/2003-CE dt.31.03.2003.

The Department issued Show Cause Notice for the period April 2005 to September 2005 involving the extended period and for the normal period October 2009 to March 2010 on the ground that when such duty-free inputs are cleared from EOU to DTA, the Duty is required to be discharged by way of cash payment, by way of debit in the Personal Ledger Account whereas the Appellants have utilized the Cenvat credit which is not legal and proper. After due process, the demands were confirmed.

Counsel appearing on behalf of the Appellants submits that there is no dispute that the inputs/ raw materials were cleared on payment of the required duties only. Both the Notifications No. 52/2003-CUS dt.31.03.2003 & 22/2003-CE dt.31.03.2003 speak of “duties” only. Therefore, when the “duties” are to be paid, the Appellant has not committed any error in paying such duties by utilizing their Cenvat credit Account for such payments.

The Counsel further submitted that there is no error in utilizing the Cenvat credit for clearance of their input/ raw materials to the DTA units wherein appropriate duty was paid by debiting Cenvat credit Account.

The Two-Member Bench of the Tribunal consisting of R Muralidhar, Judicial Member and AK Jyotishi, Technical Member observed that “If the raw materials/ inputs cleared pertain to procuring the inputs by getting the benefit of Notification No. 52/2003-CUS, the EOU is required to pay the duty only by way of cash and Cenvat credit cannot be utilized since the inputs were imported by claiming Customs Duty exemption.”

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