CENVAT Credit on Inputs from 100% Export-Oriented-Unit Allowable: CESTAT [Read Order]
Counsel further contended that as all transactions were disclosed in ER-1 returns, no suppression of facts could be alleged, making the invocation of the extended period of limitation unsustainable.
Cenvat-credit-taxscan
Cenvat-credit-taxscan
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore Bench, has held that M/s Aditya Auto Products & Engineering (I) Pvt. Ltd. is entitled to avail CENVAT credit on inputs procured from its 100% Export Oriented Unit (EOU). The Tribunal allowed the appeal, setting aside the order of the Commissioner (Appeals), which had earlier upheld the denial of credit.
The appellant, engaged in the manufacture of manual and power window regulators and their components, had availed CENVAT credit of duties on goods procured from its EOU unit. The department alleged that the company wrongly availed excess credit of additional duty of customs, education cess, and secondary higher education cess, contrary to Rule 3(7)(a) of the CENVAT Credit Rules, 2004. The adjudicating authority confirmed the demand, which was subsequently upheld by the Commissioner (Appeals).
Appearing for the appellant, Advocate B.N. Gururaj argued that restricting credit would defeat the very purpose of the CENVAT scheme. He cited Notification Nos. 22/2006-CE and 22/2009-CE (NT) and relied on Tribunal precedents, including Emcure Pharmaceuticals Ltd. (2008), Shreya Pets Ltd. (2009), and Tyche Industries Ltd. (2014), which recognized that the restrictive formula under Rule 3(7)(a) applies only to Basic Customs Duty (BCD) and Countervailing Duty (CVD), not to education cess or special additional duty (SAD).
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Counsel further contended that as all transactions were disclosed in ER-1 returns, no suppression of facts could be alleged, making the invocation of the extended period of limitation unsustainable.
The Tribunal Bench comprising Mr. P.A. Augustian (Judicial Member) and Mr. Pullela Nageswara Rao (Technical Member) observed that the payment of proper duty by the EOU was undisputed. Referring to earlier rulings, including Shreya Pets Pvt. Ltd., the Bench reiterated that full credit of education cess paid by an EOU is admissible.
Quoting the earlier decision in Emcure Pharmaceuticals Ltd., the Tribunal emphasized that Rule 3(7)(a) restricts credit only on the duty levied under Section 3 of the Central Excise Act and does not extend to levies such as education cess under the Finance Act.
Accordingly, the CESTAT Bench concluded that Aditya Auto Products was eligible for full CENVAT credit on inputs received from its EOU unit. The appeal was allowed with consequential relief, setting aside the lower authority’s order.
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