Blue Mount Textiles Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Summary: CESTAT Chennai held that a 100% Export Oriented Unit (EOU), after de-bonding and commencing manufacture as a Domestic Tariff Area (DTA) unit, was entitled to avail CENVAT credit of eligible duties actually paid at the time of de-bonding on inputs and capital goods. M/s. Blue Mount Textiles had availed CENVAT credit of duties paid while exiting the EOU scheme. The Commissioner partly allowed the credit but disallowed ₹1,03,89,840, while Revenue challenged the credit of ₹2,16,53,205 allowed by the Commissioner.
The Tribunal held that the issue stood covered by the Madras High Court decision in Stanadyne Amalgamations (P) Ltd. and AVO Carbon (India) Pvt. Ltd., which held that duties paid upon de-bonding were eligible for CENVAT credit and that the proviso inserted in Rule 3(1) by Notification No. 35/2008-CE(NT) could not restrict the substantive entitlement under Rule 3(1). The Tribunal explained that once the assessed duty was paid at de-bonding, the goods became duty-paid goods available to the assessee as a DTA manufacturer. Their earlier duty-free procurement or holding under the EOU scheme could not by itself disentitle the assessee from credit.
Eligibility under Rule 3 and documentary compliance under Rule 9 of the CENVAT Credit Rules, 2004 had to be considered together. It also rejected Revenue’s allegation that the assessee deliberately exited the EOU scheme to obtain rebate, observing that an assessee was free to manage its business in its own interest where no blameworthy conduct was involved. The assessee’s appeal was allowed with consequential relief, Revenue’s appeal was rejected and the cross-objection was disposed of.
