2018 (7) TMI 1366 – CESTAT NEW DELHI – 2018 (362) E.L.T. 904 (Tri. – Del.) – 100% EOU – Refund of unutilized CENVAT Credit – rejection of refund on the ground that certain inputs were procured by the appellant on payment of duty, when the same goods were covered under N/N. 22/2003 dated 31.03.2003 and have been procured without payment of any duty – Whether the appellant is entitled to CENVAT credit of duty paid on inputs procured by them for use in the manufacture of final product in the EOU?
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Held that:- Section 5A(1A) is applicable to those cases where the exemption is granted absolutely – Circular dated 26.11.2010 has referred to the Notification No. 29/2004 dated 09.07.2004 which has granted exemption to various textile articles. It has been explained that the manufacturer cannot opt to pay duty under the above notification and he cannot avail cenvat credit of duty paid on inputs.
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The appellant, being EOU was entitled to procure inputs without payment of duty under N/N
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Nos.32-33 (SJ)/CE/JPR/2018 dated 02.02.2018 passed by the Commissioner (Appeals), Central GST and Central Excise, Jaipur. The period of dispute is April to September, 2014. 2. The appellant is a 100% EOU. For manufacture of goods in the EOU, the appellant procured various inputs on payment of duty and availed cenvat credit of duty paid on such goods. The dispute pertains to the refund claims made by the appellant under Rule 5 of the Cenvat Credit Rules, 2004. Part of the refund claims were allowed and rest rejected. The rejection was on the ground that certain inputs were procured by the appellant on payment of duty, when the same goods were covered under Notification No. 22/2003 dated 31.03.2003 and have been procured without payment of any duty. The Department cited the provision of Section 5A(1A) of the Central Excise Act, 1944 and took the view that the duty paid on goods which were entitled to exemption in terms of Notification No. 22/2003 dated 31.03.2003, will not be entitled t
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itted that the provision of Section 5A(1) cannot be held against the appellant. (ii) In this connection, he relied on the decision of the Karnataka High Court in the case of CCE, Bangalore-II vs. Federal Mogul TPR India Ltd. -2016 (334) ELT 476 (Kar.). In the above decision, he argued that the Hon ble High Court has taken the view that Section 5A(1A) cannot be cited in the case of job work exemption under Notification No. 8/2005-ST. 4. Ld. AR appearing for the Revenue justified the impugned order. He brought to my notice the observation of the Commissioner (Appeals) in paras 3 and 5.3 of the Order-in-Appeal No. 32/2018 in which she observed that the appellant has challenged the order before her only on the ground that the refund was rejected on altogether different ground than those mentioned in the show cause notice. He further submitted that the Commissioner (Appeals) has not examined the issue on merit and hence appellant is not entitled to argue the merits of the case in the presen
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ty in terms of Notification No. 22/2003 dated 31.03.2003. The concurrent finding of both the authorities below is that the cenvat credits are irregular and hence the refund of such credits under Rule 5 of the Cenvat Credit Rule will not be admissible. 7. The provision of Section 5A (1A) of the Central Excise Act is reproduced below: where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods Revenue is of the view that the above provision would mean that the duty paid on inputs cannot be allowed as cenvat credit, in view of Notification No. 22/2003. 8. Section 5A(1A) is applicable to those cases where the exemption is granted absolutely. The CBEC has explained the above provisions by issue of Circular dated 26.11.2010. The circular has referred to the Notification No. 29/2004 dated 09.07.2004 which has
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ision of Section 5A(1A) as well as the Circular dated 26.11.2010 are not applicable for procurement of goods under Notification No. 22/2003. Consequently, there is no infirmity in the availment of credit by the appellant on duty paid. Further, the appellant will also be entitled to refund under Rule 5 of the Cenvat Credit Rules subject to satisfaction of conditions for claim of such refund. 10. Ld. AR has raised the ground that the impugned order has been passed deciding the appeal only on the ground that rejection of refund was altogether on a different ground from that raised in the show cause notice. It has further been submitted that the appellant may not be entitled to argue the merits before this Tribunal. A perusal of the impugned orders reveal that the lower authority has also sdiscussed the merits of the case and has referred to the provisions of Section 5A as well as the CBEC Circular dated 26.11.2010. This is sufficient to conclude that the lower authority has also touched u
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