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100% EOUs are entitled for CENVAT Credit on HSD notwithstanding exclusion of same from definition of input under CENVAT Credit Rules, 2004: CESTAT

By TIOL News Service

BANGALORE, NOV 18, 2016: THE appellant is a 100% EOU and they availed CENVAT Credit of duty paid on HSD used as fuel. Revenue denied the credit on the ground that HSD is specifically excluded from the definition of ‘input' under Rule 2(k) of the CENVAT Credit Rules, 2004 and therefore duty paid on HSD is not admissible as CENVAT Credit under the said Rules.

The appellant contended inter alia that it is always the legislative intent that duty incidence on procurements of EOU be Nil. Here the EOU procures HSD on payment of duty, the supplier is extended deemed export drawback in terms of Para 8.3 of the FTP. Therefore, where the supplier has not availed the deemed export drawback, the EOU would be entitled to avail CENVAT Credit of the duty paid on HSD and utilise the same towards payment of duty in terms of Rule 17 of the Central Excise Rules or claim refund of the unutilised Credit.

After hearing both sides, the Tribunal held:

++ The appellants took the CENVAT credit of the duty paid on the HSD used as a fuel consequent to the CBEC Circular No.799/32/2004-CX dated 23.9.2004. This Circular also makes an EOU entitled to claim refund under Rule 5 of CENVAT Credit Rules, 2004, if CENVAT credit available with them could not be utilized.

++ For the appellants, who are an EOU, the definition of an input given in Rule 2(k) of CENVAT Credit Rules, 2004 cannot restrict the entitlement, when they are taking CENVAT credit in terms of Notification No.22/2003 dated 31.3.2003. More so, when the decisions of the Tribunal viz., Hindustan Unilever Ltd. vs. CCE, Bhavnagar and CCE vs. Jagmini Micro Knit Pvt. Ltd. make it clear that appellants as an EOU can claim CENVAT credit for the duty paid on HSD oil used as fuel and when they are eligible to avail the benefit of the said Notification.

++ The Revenue's contention that in terms of definition of ‘input' given in Rule 2(k) of CENVAT Credit Rules, 2004 the appellants are not entitled to claim CENVAT credit, cannot be accepted, when the Notification No.22/2003 dated 31.3.2003 makes an EOU entitled to claim CENVAT credit on the procurement of HSD used as fuel.

(See 2016-TIOL-2990-CESTAT-BANG)


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