Custom, Excise & Service Tax Tribunal
C.C.E Meerut-I vs M/S. Bharat Heavy Electricals Ltd on 6 May, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/716/2008 -Ex[DB]
[Arising out of Order-In-Original No. 67/Commr./M-I/2007 dated 26.12.2007 passed by Commissioner of Central Excise Meerut-I]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
C.C.E Meerut-I ...Appellant
Vs.
M/s. Bharat Heavy Electricals Ltd. Respondent
Appearance:
Mr. MS Negi DR for the Appellant
Mr. Rupesh Kumar, Advocate for the Respondents
CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
Date of Hearing/decision.06.05.2015
FINAL ORDER NO. 51682 /2015-Ex(Br)
Per Rakesh Kumar (for the Bench):
The facts leading to filing of this appeal are, in brief, as under:
1.1 The respondent Bharat Heavy Electricals Ltd. are manufacture Steam Turbine, Hydraulic Turbine, Gas Turbine, Electric Generator Sets, Motors, Panels and Condensers. The period of dispute in this case is from April 2006 to December 2006. During this period, the respondent had supplied boilers to their customers on payment of duty as well as also to their customers against international competitive bidding at nil rate of duty under exemption notification no. 6/06-CE (serial No. 301). Notification no. 6/06-CE (serial No. 301), exempts the goods of any chapter supplied against international competitive bidding from whole of the duty of excise, subject to condition that the goods if imported are exempt from duty of customs leviable under first schedule to the Customs Tariff Act, 1975, and also from whole of additional Customs Duty leviable under section 3 of the said customs tariff act when imported into India. The Department was of the view that since, during the period of dispute the Respondent has used common Cenvat Credit availed inputs/ input services for manufacture of dutiable final product as well as exempted final product and since they have not complied with the provisions of Rule 6(2) of the Cenvat Credit Rules, 2004 i.e. they have not maintained a separate account and inventory of the inputs/ input services meant for dutiable final product and exempted final product and confined the Cenvat Credit availment only to the inputs/input services meant for use in or in relation to manufacture of dutiable final product, the provisions of Rule 6(3) would become applicable and in accordance with clause (b) of Rule 6(3), the Respondent in respect of the goods cleared at nil rate of duty under notification no. 6/06-CE (serial No. 301), would be liable to pay an amount equal to 10% of the sale value of the goods. It is on this basis that a SCN was issued to the respondent for demand of an amount of Rs. 30,33,30,683/- from the respondent under Rule 6(3)(b) read with Rule 14 of the Cenvat Credit Rules, 2004, and section 11A of the Central Excise Act, 1944, along with interest thereon under section 11AB and also for imposition of penalty on them under Rule 15 of the Cenvat Credit Rules, 2004 read with section 11AC of Central Excise Act, 1944. The SCN was adjudicated by the Commissioner vide order-in-original dated 26.12.2007 by which the Commissioner dropped the proceedings against the Respondent on the ground that in terms of clause (vii) of sub rule 6 of Rule 6 of the Cenvat Credit Rules 2004, the provisions of sub rule (1),(2),(3) & (4) are not applicable in respect of the goods supplied against international competitive bidding at nil rate of duty under exemption notification no. 6/06-CE dated 1/03/2006. The Commissioner in this order has rejected the Departments view that clause-(vii) of Rule 6(6) is not applicable to the goods manufactured in India and is applicable only to the imported goods. The above order of the Commissioner was reviewed under section 35E(1) of the Central Excise Act, 1944 by the Committee of Chief Commissioners and the Committee of Chief Commissioners vide order dated 19.03.2008 directed the Commissioner to file an application before the Tribunal under section 35E(4) of the Central Excise Act, 1944, for correct determination of the points arising out of the order as mentioned in the review order. The point to be referred to the Tribunal for decision is whether the Tribunal should set aside the order-in-original No. 67/Commr/MRT-I/07 dated 26.12.2007 and confirm the demand, interest thereon and impose penalty as proposed in the SCN. In pursuance of the above order passed by the Committee out of Chief Commissioners under section 35(E)(1), the Commissioner filed an application before the Tribunal which has been treated as an appeal by the Revenue.
2. Heard both the sides.
3. Sh. MS Negi, the Ld. DR, assailed the impugned order by reiterating the grounds of appeal and the points raised in the review order passed by the Committee of chief commissioners and emphasized that the respondent are not entitled to the benefit of Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, because in the instant case, the goods supplied to the mega power plant against the international competitive bidding, at nil rate of duty under notification no. 6/06-CE are the goods manufactured in India at Haridwar Unit of the Respondent and are not imported as provided in the condition underlying in the said rule. He emphasized that the provisions of Rule 6(6)(vii) are applicable only to the imported goods which are exempted from the basic customs duty as well as additional duty and are supplied against international competitive bidding and these provisions are not applicable to the goods manufactured in India and supplied at nil rate of duty under notification no. 6/06-CE dated 01.03.2006 against international competitive bidding. He, therefore, pleaded that the impugned order is not correct.
4. Sh. Rupesh Kumar, Advocate the Ld. Counsel for the Respondent, pleaded that the goods had been supplied by the respondent for a mega power project against international competitive bidding and the same had been cleared at nil rate of duty under notification no. 6/06-CE (serial No. 301), that serial no. 301 of the notification no. 6/06-CE prescribes nil rate of duty for the goods of any chapter of the Central Excise tariff supplied against the international competitive bidding, subject to condition no. 64 prescribed in the notification, which is that the goods are exempted from the duties of customs leviable under first schedule of the Customs Tariff Act, 1975 and Additional Customs duty leviable under section 3 of the said Customs Tariff Act, if imported into India, that in terms of sub rule 6(vii) of Rule 6 of the Cenvat Credit Rules, 2004, the provisions of sub Rule (1),(2),(3) & (4) would not be applicable in case the excisable goods removed without payment of duty are the goods which are exempt from duty of customs leviable under first schedule to the customs tariff act 1975 and additional customs duty leviable under sub section 1 of section 3 of the said Customs Tariff Act when imported into India and are supplied against international competitive bidding in terms of notification no. 6/06-CE dated 1.3.2006, that Rule 6(6) is in respect of the goods manufactured in India which have been removed at nil rate of duty, that the Departments contention that clause (vii) of Rule 6(6) is applicable only in respect of imported goods is absurd as from the language of sub Rule (6) of Rule 6 it is clear that this sub Rule is in respect of the excisable goods removed without payment of duty and hence this sub rule is only in respect of the excisable goods which have been manufactured in India and have been removed at nil rate of duty, that the wordings in clause (vii) of sub rule 6 only reproduce the conditions for full duty exemption under notification no. 6/06-CE in respect of the goods supplied against International Competitive Bidding and there is nothing in the language of clause (vii) of Rule 6(6) form which it can be inferred that this clause is applicable only to the imported goods and not to the goods produced or manufactured in India, that question of payment of excise duty and exemption notification no. 6/06-CE would arise only if the goods cleared and supplied against international competitive bidding are those manufactured in India and this question would not arise if the goods had been imported. He, therefore, pleaded that there is no infirmity in the impugned order.
6. We have considered the submissions from both the sides and perused the records. The respondent by using common cenvat credit availed inputs/ input services manufactured dutiable final product as well as exempted final product. The exempted final product during the period of dispute were those supplied at nil rate of duty against international competitive bidding under notification no. 6/06-CE dated 1/3/2006. The notification no. 6/06-CE (serial No. 301) prescribes nil rate of duty for the goods cleared against international competitive bidding subject to condition that the goods if imported into India, are exempt from the duties of customs leviable under first schedule to the Customs Tariff Act, 1975, and also from the additional customs duty leviable under section 3 of the said Customs Tariff Act 1975. In terms of Rule 2(d) of Cenvat Credit Rules, 2004, the exempted goods means excisable goods which are exempt from the whole duty of excise leviable thereon and include the goods which are chargeable to nil rate of duty. Rule 6 of the Cenvat Credit Rules, 2004 is applicable when a manufacturer of final product either wholly manufacturers the exempted goods or he by using common cenvat credit availed inputs/ input services manufactures dutiable goods as well as exempted goods. Sub rule (2) read with Sub Rule (3) of Rule 6 cover the situation where a manufacturer of final product by using common input/ input services manufactures dutiable as well as exempted final product and in accordance with sub rule 3, if he does not comply with the provisions of sub rule (2) i.e. he does not maintain a separate account and inventory in respect of inputs/ input services used in or in relation to manufacture of dutiable final product and exempted final product and confines Cenvat credit availment only to Inputs/Input services used in or in relation to manufacture of dutiable final product, he would be liable to pay an amount in respect of the clearances of the exempted final product as per the provisions of sub rule 3. In terms of sub rule 1 of Rule 6, the cenvat credit shall not be allowed on such quantity of inputs/ input services which have been used in or in relation to the manufacture of the exempted final product. However, sub rule 6 exempts a manufacturer from the provisions of sub rule (1),(2),(3) & (4) in certain situations. In this regard, the relevant part of sub rule 6 of Rule 6 is reproduced below:
(6) The provisions of sub rule (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty and either._
(i) Cleared to a unit of special economic zone; or
(ii) Cleared to a 100% Export Oriented undertaking; or
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(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of notification No. 6/2002-Central Excise dated the 1st March, 2002 or notification No. 6/2006-Central Excise dated the 1st March, 2006, as the case may be From plain reading of sub rule 6 it is clear that the provisions of sub rule (1),(2),(3) & (4) would not be applicable in case the excisable goods removed without payment of duty are the goods which if imported into India are exempt from the duties of customs leviable under customs tariff act and additional customs duty leviable under section 3(1) of the said Customs Tariff Act and have been supplied against international competitive bidding in terms of notification no. 6/06-CE dated 1.3.2006. 6.1 Thus, when the goods manufactured into India have been supplied against international competitive bidding the same would be eligible for full duty exemption under notification no. 6/06-CE, if the same satisfy the condition prescribed in the notification that the same goods, if imported into India are fully exempt from customs duty as well as additional customs duty. In terms of Clause (vii) of Rule 6(6), the provisions of sub rule (1) (2), (3) and (4) are not applicable in respect of such goods. The Departments contention that clause (vii) of sub rule (6) is not applicable to the goods manufactured in India but is applicable only to the imported goods is absurd, as the clause-(vii) cannot be read in isolation but has to be read with the main provision of sub rule 6. Moreover Rule 6 of the cenvat credit Rules is in respect of the goods manufactured in India and this rule, in general, contains provisions regarding denial of cenvat credit in respect of inputs/ input services which have gone into the manufacture of exempted final products or exempted output services. Sub rule 6 of Rule 6 enumerates the situations in which the cenvat credit would be available in respect of inputs/Input services even if the same have been used in or in relation to manufacture of final product which have been cleared at nil rate of duty or have been cleared without payment of duty like clearances for export under bond, supplies 100% EOU/SEZ units etc. There is nothing in this sub rule form which it can be inferred that clause-(vii) is applicable to the goods imported into India. In our view, the Review order passed by two senior Chief Commissioners is an absurd order passed with absolutely no application of mind and as such there is absolutely no merit in this appeal filed by the Revenue. We are amazed as to how such an absurd order can be passed by such senior officers of the Department. The Revenues appeal is, therefore, dismissed.
(Dictated and pronounced in open court)
(S.K. Mohanty) (Rakesh Kumar)
Member(Judicial) Member(Technical)
Neha
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