Custom, Excise & Service Tax Tribunal
Saurav Chemicals Ltd vs Cce, Chandigarh-I on 28 August, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT No. II APPEAL No. E/537-538/2012 [Arising out of Order-in-Appeal No. 219-220/CE/Appeal/Chd-II/2011 dated 12.12.2011 passed by the Commissioner of Central Excise (Appeals), Chandigarh-II.] Date of hearing: 28.04.2017 Date of decision:23.08.2017 For approval and signature: Honble Mr. Devender Singh, Member (Technical) ======================================
Saurav Chemicals Ltd.
:
Appellant(s) VS CCE, Chandigarh-I :
Respondent(s) ====================================== Appearance:
Sh. Surjeet Bhadu, Advocate for the Appellant(s) Sh. Satyapal, AR for the Respondent(s) CORAM:
Honble Mr. Devender Singh, Member (Technical) Final Order No. /2017 Per : Devender Singh
The appellants have filed these appeals against the impugned orders. As the issue is common in both the appeals, therefore, both are disposed of by a common order.
2. The brief facts of the case are that the appellants are manufacturer of excisable goods falling under Chapter 29 of the Central Excise Tariff. On scrutiny of the records of the rebate claims in respect of Homatropine Methyl Bromide and Homatropine Hydro Bromide, it was seen that these two compounds being derivatives of Homatropine were chargeable to nil rate of duty in terms of Notification No. 04/06-CE dt. 01.03.2006. However, the appellants were treating both the items as excisable and were clearing the same in the domestic market on payment of duty and for export on payment of duty under rebate claim or against LUT or CT-1 certificate for supplies to 100% EOU. As per the provisions of Section 5A(1A) the manufacturer shall not pay duty of excise on the goods, where an exemption under Sub-Section (1) from the whole of the duty of excise has been grated absolutely. Hence, the Revenue felt that the duty paid on the clearance of these two compounds cannot be treated as duty in terms of Section 3 of Central Excise Act. Two show cause notices were therefore issued; one for recovery of Cenvat Credit for recovery of 10% or 5% of the value of the exempted goods for non-maintenance of separate accounts of exempted and dutiable goods; the period involved is March, 2009 to December, 2009. The second show cause notice was issued for disallowing the Cenvat Credit on the inputs exclusively used in the manufacture of aforesaid exempted goods; the period involved is February, 2009 to August, 2009. The demands of Rs. 22,56,754/- and Rs. 9,86,146/- respectively were confirmed and penalty of Rs. 2,00,000/- was imposed on appellant in each case. The appellants went in appeal. However, the Ld. Commissioner (Appeals) rejected both the appeals. Aggrieved from the same, the appellants have filed these appeals.
3. Ld. Advocate for the appellants submits that the Notification No. 04/06-CE exempts Homatropine and both the compounds were exempted under Sr. No. 43 of the said notification. The appellants were exporting under LUT (bond) under Rule 19, supplying to EOUs (deemed export), they were also claiming rebate on some of the export and in the first appeal two transactions were for domestic sale whereas there was no domestic transaction in the second appeal. He contended that under Rule 6(6) supplies to EOU/SEZ are covered as well as export under bond. However, bond/LUT were not applicable as their product is exempted. He further contended that the issue is covered by the judgment of the Honble Himachal High Court in the case of CCE Vs. Drish Shoes Ltd. 2010 (254) ELT 417 (HP) wherein it was held that sub rule 5 of Rule 6 was applicable in case of exempted goods and sub rule 6 of Rules 6 of Cenvat Credit Rules applies to both exempted as well as dutiable goods. He also relied in the judgment of this Tribunal in the case of Arvind Ltd. Vs. CCE, Ahmedabad-III 2016 (334) ELT. 146 (Tri. Ahmd.) and on the Final Order No. A/60480-60481/2017-SM[BR] dt. 28.03.2017 of this Tribunal in appellants own case.
4. Ld. AR for the Revenue reiterated the findings in the order of the Ld. Commissioner (Appeals).
5. Heard the parties and perused the record.
6. Appeal No. E/537/2012-EX[DB]:-
Ld. Advocate has explained that the out of 639 Kg of the 2 compounds, except for two invoices which were for domestic sale, the remaining invoices were for export goods under LUT, against rebate claim and against CT-1 certificate for supplies to 100% EOU. I find that in the case of CCE Vs. Drish Shoes Ltd. (supra), it has been held by the Honble Himachal High Court that Rule 6 (6) of the Cenvat Credit Rules is applicable to an assessee manufacturing the goods chargeable to nil duty as the expression excisable goods in Rule 6(6) of the Cenvat Credit Rules, 2004 includes both dutiable as well as exempted goods. In the said judgment, the Honble High Court observed as under:-
18. Learned? counsel for the appellant argued that term excisable goods used in sub-rule (6) of Rule 6 of 2004 Rules, meant only dutiable goods. Submission has been noticed only to be rejected.
19. A Division Bench of Bombay High? Court in 2009 (235) E.L.T. 614 (Bom.), Repro India Ltd. v. Union of India, while dealing with a similar situation and interpreting the provisions of Rule 6(5) of CENVAT Credit Rules, 2002 and Rule 6(6) of CENVAT Credit Rules, 2004, has held that expression excisable goods is wider than the expression exempted goods, as it includes both dutiable as also exempted goods.
20. In view of the above discussion, we hold that an assessee, manufacturing goods chargeable to nil duty, is eligible to avail CENVAT credit paid on the inputs under the exception clause to Rule 6(1), as contained in Rule 6(5) of CENVAT Credit Rules, 2002 and Rule 6(6) of CENVAT Credit Rules, 2004, used in the manufacture of such goods, if the goods are exported. Question No. 1 is answered accordingly.
21. As regards? question No. 2, it is clear from a bare reading of Rule 5 of CENVAT Credit Rules, 2004 that a manufacturer, who exports the final products which are exempt from duty, can claim refund of CENVAT. So, this question is also answered against the appellant. In view of the above, the findings of the Ld. Commissioner in Para 14 of his order are not sustainable. Further, the goods supplied against CT-1 to EOU are specified in exception to Rule 6(6) itself.
7. As for the invoices against which rebate has been claimed, goods under such invoices are not covered by judgment of CCE Vs. Drish Shoes Ltd. (supra) which is in relation to goods exported under LUT bond. The issue whether duty paid on unconditionally exempted goods and rebate claimed thereafter is covered under Rule 6(6)(v) of Cenvat Credit Rules came up before this Tribunal in the case of Castleton Tea Co. Vs. CCE, Kolkatta-II 2016 (340) ELT 610 (Tri.- Kolkata), wherein the Tribunal held as under:-
5.?As per Rule 6(1) of the Cenvat Credit Rules, 2004 no credit shall be admissible in relation to manufacture of exempted goods. It has not been denied by the appellant that the goods manufactured by them are not unconditionally exempted. Simply by paying duty on exempted goods does not make the goods dutiable. As per the provisions contained in Section 5A of Central Excise Act, 1944, when there is an unconditional exemption Notification then an assessee/manufacturer shall not pay duty of excise on such exempted goods. Further as per Rule 6(3) of the Cenvat Credit Rules, 2004 when any common inputs are used in the manufacture of dutiable and exempted goods then appellant is required to pay an amount equivalent to 10% on the value of exempted goods as demanded by the Department. So far as the provisions contained in Rule 6(6) of Cenvat Credit Rules, 2004 are concerned, the case of the appellant is that even exempted goods are excisable goods, therefore, amount under Rule 6(3) cannot be denied if the goods are cleared without payment of duty. However, it is observed that as per provisions of Rule 6(6)(v) of Cenvat Credit Rules, 2004, amount is not required to be paid under Rule 6(3) when goods are removed without payment of duty for export under bond in terms of provisions of Central Excise Rules, 2002. In the case of the appellant, the goods were not exported under bond, but were cleared on payment of duty, therefore, First Appellate Authority was fully justified in dismissing the appeal filed by the appellant and this Bench does not find any justification in interfering with the same. Following the above judgment, I hold that appellant are required to pay an amount equivalent to 10% on value of exempted goods.
The appellants have pleaded that they have paid back the amount of rebate received by them in cash. This fact would require verification by the adjudicating authority and the amount paid back in cash may be adjusted against 10% of value of exempted goods.
8. As for the goods cleared under domestic sales in two transactions, the amount of duty paid shall amount to the reversal of Cenvat Credit on the inputs as held by this Tribunal in the appellants own case vide Final Order No. A/60480-60481/2017-SM[BR] dt. 28.03.2017 in identical circumstances.
9. In Appeal No. E/538/2012:-
In the oral pleadings it was submitted by ld. Advocate that the goods in this case also have been cleared for export and there was no domestic transaction in this appeal. However, neither in their submissions before the Ld. Commissioner (Appeals) nor elsewhere is it mentioned whether the export was against LUT/CT-1/rebate, hence, these facts needs to be verified by the adjudicating authority and appropriate order passed.
10. In view of the foregoing,
(i) In Appeal No. E/537/2012, the benefit of Rule 6(6) of Cenvat Credit Rules, 2004 is allowed to the appellant in respect of the goods exported under LUT and CT-1. In respect of the sales to the domestic tariff area, the appellant would be entitled to adjustment of duty paid against the reversal of Cenvat Credit on inputs used in manufacture of exempted products. In respect of exports against rebate, the matter is remanded back to the adjudicating authority to verify whether the rebate claimed has been returned back by cash by the appellant and if so, the amount paid back in cash be adjusted against 10% of value of exempted goods.
(ii) In Appeal No. E/538/2012-EX[DB], the matter is remanded back to the adjudicating authority for verification as to the mode of export (whether under CT-1/LUT/rebate) and to pass a fresh order in accordance with law.
11. The appeals are disposed of as above.
(Order pronounced in the Court on 23/08/2017) Devender Singh Member (Technical) NS 6 Appeal No. E/537-538/2012-CHD