Accumulated CENVAT Credit Of EOU Unit Can Be Transferred To DTA Unit After Exit Of EOU Status: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the accumulated CENVAT credit of export-oriented units (EOU) can be transferred to the Domestic Tariff Area (DTA) Unit after the exit of EOU status.

The bench of Sulekha Beevic (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the unit has become a DTA after exiting from EOU status. Under Central Excise Law, both of these units are considered separate entities. The accumulated credit cannot be denied to both units, and the department cannot recover such credit that belongs to the appellant.

The appellants and assessees are holders of Central Excise registration and are engaged in the manufacture of pistons falling under CETH 87081090 of the Central Excise Tariff Act 1985.

They are holding registration as a 100% EOU till 13/3/2012 and cleared their goods for export as well as to DTA on payment of duty. Consequent to MEPZ Final Exit Order dated 13/3/2012, they surrendered EOU status and obtained an amended registration for functioning as a DTA unit.

They applied for an NOC to exit from EOU status. They have procured raw materials on payment of duty and availed CENVAT credit for the same. After exiting from EOU, the appellant carried forward the CENVAT credit lying in their balance to the DTA Unit.

The department was of the view that the status of the EOU unit is different from the DTA unit, and as there is no change of ownership as contemplated under Rule 10 of CENVAT Rules 2004, the credit cannot be carried forward.

The department noted that there is no provision for the transfer of accumulated unutilized CENVAT credit from an EOU unit to a DTA unit after its conversion. The CENVAT credit carried forward by the appellant to the DTA unit is not correct, for which a Show Cause Notice was issued, proposing to disallow the credit so transferred from the EOU to the DTA unit, recover the same with interest, and impose penalties. After due process of law, the original authority confirmed the demand along with interest and imposed penalties.

The assessee contended that there is no bar under Rule 10 to transfer the credit when the same legal entity is converting its status from EOU to DTA. The credit accumulated belongs to the appellant. Only because the status of the unit is converted from EOU to DTA can the accumulated credit that is unutilized be denied to both units.

The department argued that as there is no merger or transfer of ownership, the accumulated unutilized credit cannot be transferred to the DTA Unit.

The tribunal held that the accumulated credit cannot be denied to both units, and the department cannot recover credit that belongs to the appellant.

Counsel For Appellant: S. Murugappan

Counsel For Respondent: Rudra Pratap Singh

Case Title: M/s. Super Auto Forge Ltd. Versus Commissioner of GST & Central Excise

Case No.: Excise Appeal No.40856 Of 2014

Click Here To Read The Order