The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that registration under rule 3(7)(a) Cenvat Credit Rules, 2004 cannot be applied when duty has not been paid availing the benefit of excise notification.
The appellant, M/s Sun Pharmaceuticals Industries Limited were procuring inputs from 100% EOU. The said goods had suffered excise duty as per Notification No. 23/03-CE dated 31.03.2003. He pointed out that the Cenvat credit which can be availed in respect of goods procured from 100% EOU is governed by the formula prescribed under Rule 3(7)(a) of Cenvat Credit Rules, 2004.
Two show cause notices were issued to the appellant where one notice invoking an extended period of limitation from March 2007 to February 2009 and the second for the normal period of limitation from March 2009 to April 2009. The Show Cause Notices also sought imposition of penalty under Rule 15 of Central Excise Rules and demand interest under Section 11AB of the Central Excise Act, 1944.
He further argued that they recalculated the CENVAT credit as per the formula given in rule 3(7)(a) and in some cases they found excess availment of CENVAT credit of Rs.25,854/- which was reversed by them immediately vide Entry No.745 dated 06.10.2020 and intimated to Range Superintendent vide letter dated 07.10.2010. If the BCD rate is taken as 7.5% then CENVAT credit eligible amount arrives at equal to the CVD portion only of which the Appellant has taken the credit.
He pointed out that the Commissioner in his order wrongly stated that, the Appellant contended as all invoices raised by EOU supplier are not duty paid under Sr.No.2 of Notification No.23/2003 CE dated 31.03.2003 hence formula is not applicable in those cases.
The formula specified in rule 3(7) (a) is applicable in cases only where the goods are procured from an EOU which pays excise duty u/s 3 of Central Excise Act, 1944 read with Sr.No.2 of Notification No.23/2003 dated 31.03.2003.
He argued that when EOU clears the goods without availing the benefit of exemption of Sr.No.2 and on payment of excise duty at full rate DTA procuring such goods is entitled to avail CENVAT credit of all excise duties under rule 3(1) of CENVAT Credit Rules, 2004 and the same cannot be restricted by applying the formula.
It was thus observed that the matter needs to be reconsidered by the original adjudicating authority by examining all invoices individually. The provisions of Rule 3(7)(a) of Cenvat Credit Rules would be applicable only in cases where the duty has been paid taking benefit of Serial No. 2 Notification No. 23/2003-CE dated 31/03/2003.
The two-member bench comprising Ramesh Nair and Raju observed that in cases where duty has not been paid availing benefit of Serial No. 2 Notification No. 23/2003-CE dated 31/03/2003, the registration prescribed under Rule 3(7)(a) cannot be applied. The CESTAT set aside the impugned order and the matter is remanded to the original adjudicating authority for a fresh decision.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
