The main legal point established in the judgment is that the Assessee was entitled to avail the benefit of Cenvat Credit under Rule 3(1) of Cenvat Credit Rules 2004 for the Duties paid upon De-bonding.

JUDGMENT :

VINEET KOTHARI, J.

1. These two Appeals arise from the order of CESTAT dated 14.2.2017 and are being disposed of by this common Judgment.

2. The facts are illustratively taken from C.M.A.No.2280 of 2017 (M/s.Stanadyne Amalgamations v. Commissioner of Central Excise), which, in brief, are as under:-

The Assessee, M/s.Stanadyne Amalgamations started off its 100% Export Oriented Unit (EOU) for manufacture of Carbon Brushes, but, subsequently, they surrendered their EOU status on 23.2.2012 by adopting De-bonding procedure and became a Domestic Tariff Area (DTA) Unit. At the time of De-bonding, the Appellant/Assessee paid appropriate Duty and Countervailing Duty (Additional Excise Duty) on the imported/indigenously procured raw materials lying in Stock and capital goods on depreciated value as per Rules which were procured and imported without payment of duty when it was 100% EOU and after De-bonding on 23.2.2012, it became liable to pay such Duties in accordance with Notification No.22/2003-CE(NT) dated 31st March 2003.

3. The question involved in the present cases is as to whether such Duties paid by the Assessee upon De-bonding can be availed as Cenvat Credit under Rule 3(1) of Cenvat Credit Rules 2004 against its Output Duty liability, or not in terms of para 8 of Notification No.22/2003 dated 31.3.2003.

4. The Tribunal, by its impugned order, upheld the order passed by the Adjudicating Authority and held against the Assessee that the Assessee was not so entitled to avail the benefit of Cenvat Credit under Rule 3(1) of Cenvat Credit Rules 2004. Aggrieved by the same, the Assessees have preferred the aforesaid two Appeals before this court.

5. Mr.Arvind P.Datar, learned Senior Counsel appearing for the Assessee in C.M.A.No.2280 of 2017 and Mr.M.Karthikeyan, learned counsel appearing for the Assessee in C.M.A.No.3023 of 2017 have submitted that Rule 3 of the Cenvat Rules 2004 allows the Manufacturer to take the Cenvat Credit in respect of 11 types of Duties including Excise Duties specified in the first Schedule to the Excise Tariff Act, Additional Excise Duty, Additional Excise Duty under Section 3 of the Exempted Tariff Act (Countervailing), Service Tax, Education Cess, etc and when such Duties are paid upon De-bonding by a 100% EOU converted into a DTA, such Duties paid on Input or Capital Goods are eligible for Cenvat Credit against Output Tax liability of the Assessee. The learned Senior Counsel drew our attention to the Proviso inserted in Rule 3 by the Notification No.35/2008 CE (NT) dated 24.9.2008 which has been misinterpreted and mis-applied by the Adjudicating Authority as well as the learned CESTAT to restrict such claim of the Assessee for Cenvat Credit only in respect of the amount equal to Central Excise Duty paid on the Capital Goods at the time of De-bonding of the Unit. They submitted that the since the Exemption of Duty under the Notification No.22/2003 CE 31st March 2003 was available subject to Bond furnished by the 100% EOU which the Assessee was at the relevant point of time of procurement of raw material or Capital Goods from the foreign country as well as domestic market and upon De-bonding procedure adopted when it had been declared as DTA with effect from 23.2.2012 and it paid such Duties, the Cenvat Credit in respect of the same cannot be disallowed by the Revenue. They relied upon the decision of Mumbai Bench of CESTAT in the case of CCE v. Rajdhani Fab. Pvt. Ltd (2008 (221) ELT 435) which was affirmed by the Bombay High Court by dismissal of the Appeal of the Revenue in limine on 24.9.2008, as reported in 2009 (237) ELT A47 (Bom.). They also relied upon the decision of Privy Council in the case of The Madras and Southern Mahratta Railway Co. Ltd. v. The Bezwada Municipality (57 LW 422). Mr.Datar, therefore, urged that the present Appeals of the Assessee deserve to be allowed and the order of the learned Tribunal deserves to be set aside.

6. Per contra, the learned Standing Counsel Mr.A.P.Srinivas