Custom, Excise & Service Tax Tribunal
Inox Air Products Private Limited vs Visakhapatnam - G S T on 3 June, 2019
(1) Appeal No. E/30091/2019
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Single Member Bench - Court - I
Excise Appeal No. 30091 of 2019
(Arising out of Order-in-Appeal No. VIZ-EXCUS-001-APP-129-18-19, dated 13.08.2018
passed by Commissioner(Appeals) Customs & Central Tax, Visakhapatnam)
Inox Air Products Pvt. Ltd. .. APPELLANT
Plot No. 92, I D A,
Autonagar,
VISAKHAPATNAM - 530 012.
Andhra Pradesh
VERSUS
Commissioner of Central Tax .. RESPONDENT
VISAKHAPATNAM GST GST Commissionerate, Port Area, VISAKHAPATNAM - 530 035.
Andhra Pradesh APPEARANCE:
Shri A. Satabish, Advocate for the Appellant.
Shri V.R. Pawan Kumar, Superintendent/AR for the Respondent.
Coram:
Hon'ble SHRI P. VENKATA SUBBA RAO,MEMBER (TECHNICAL) FINAL ORDER No. A/30542/2019 Date of Hearing: 13.05.2019 Date of Decision: 03.06.2019 [ORDER PER: Mr. P.Venkata Subba Rao)
1. This appeal is filed against the Order-in-Appeal No. VIZ-EXCUS-001-
APP-129-18-19, dated 13.08.2018.
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2. Heard both sides and perused the records.
3. On request, both sides were given a day to make additional written submissions. Accordingly, on 14.05.2019, both sides made additional written submissions.
4. The facts of the case in brief are that the appellants were issued a show cause notice dt. 08.03.2016 demanding an amount of Rs. 2,31,934/- under Rule 6 of CENVAT Credit Rules, 2004 along with interest being the amount equal to six per cent of the total value of "Dissolved Acetylene Gas"
cleared by them from their factory under notification No. 82/84-CE, dated 31.03.1984 (as amended) without payment of duty. It is the case of the Revenue that since the appellant cleared these products without payment of duty, claiming exemption under notification No. 82/84-CE, they have to pay an amount as per Rule 6(6) of CCR 2004. It is the case of the appellant that their final product namely Dissolved Acetylene Gas is neither chargeable to nil rate of duty nor is exempted from payment of duty. In fact, the same product is being sold by them to several customers on payment of excise duty. In respect of the goods supplied to Hindustan Shipyard Limited, they avail the benefit of notification No. 82/84-CE, dated 31.03.1984 after following Chapter X procedure. It is their case that goods cleared under Chapter X procedure are neither chargeable to nil rate of duty nor are the goods fully exempted from payment of duty but are goods on which the duty is remitted. Therefore, in respect of such clearances, no reversal of CENVAT Credit under Rule 6 or payment of an amount under this rule is necessary. Ld. Counsel would submit that on an identical matter in their own case for earlier periods, this Bench vide following final orders has held in their favour:
(i) Final Order No. A/30589-30590/2018, dated 21.05.2018 in Appeals No. E/30361 & 30363/2018.
(ii) Final Order No. A/30405/2018, dated 08.02.2018 in appeal No. E/31202/2017.
(iii) Final Order No. A/31276/2017, dated 17.08.2017 in Appeal No. E/21732/2015.
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(iv) Final Order No. A/31455-31460/2017, dated 07.09.2017 in Appeals No. E/291/2012, E/27926/2010, E/1047/2009, E/2092/2012 and E/2093/2012.
5. Ld. Counsel would draw the attention of the Bench to the aforesaid Final Orders and submit that the above decisions of this Bench were taken following the ratio of the order of CESTAT, Mumbai in the case of Dharamsi Morarji Chemical Co. Ltd. [2010(255)ELT 314 (Tri.-Mumbai)] which was said to be upheld by Hon'ble High Court of Mumbai as reported at [2016(338)E.L.T. A 38 (Bom.). He also relies on the order of the Tribunal Delhi in the case of S R F Limited [2008(223)ELT 508 (Tri.-Del.)] which was upheld by Hon'ble Apex Court by dismissing the Revenue's appeal as reported in [2010 (255) A 13 (SC)]. He also submits that the aforesaid order of Hon'ble Tribunal, Delhi in the case of SRF Limited was based on the following case laws:
(a) Alpha Drugs India Ltd. Vs. CCE Chandigarh [2000(118)ELT 783 (Tri.- CHD)
(b) India Poly Fibres Limited Vs. CCE Allahabad [1999(111)ELT 748
(c) Reliance Industries Ltd. Vs. CCE, Bombay [1995(78)ELT 595 (T)
(d) J.K. Synthetics Ltd. Vs. CCE Jaipur [1996 (87) ELT 339 (T)
(e) Orissa Synthetics Ltd. Vs. CCE [1995 (77) ELT 350 (T).
He would submit that in view of the above, the matter is now well settled including in their own case for the earlier periods, and hence their appeal may be allowed in the present case also.
6. Ld. DR vehemently counters the arguments of Ld. Counsel. He concedes that the demands for the earlier periods in respect of the same appellant on the same issue were decided in their favour but a few facts need to be considered now before deciding the matter. Firstly, the order of the Tribunal Bombay in the case of Dharamsi Morarji Chemical Co. Ltd. (supra) was not upheld by the High Court of Mumbai but was dismissed for non prosecution. In other words, the merits of the case were not examined (4) Appeal No. E/30091/2019 by Hon'ble High Court of Mumbai in this particular case. On the other hand, on identical matter, there are two judgments of two different High Courts which are binding on this Bench and prevail over the precedent orders of this Bench for the previous periods and in both orders it was held that CENVAT Credit need to be reversed. They are (1) Atlas Automotive Components Pvt. Ltd. vs. Union of India [2017(350)ELT 42 (Bom.)], paras 21, 22 & 23 of which read as follows:
"21. Therefore, the observations in Para 17.1 would apply to cases which are of the nature found by the Tribunal. The allegations and the demand is clear. Petitioner No. 1 clear their final product, castings. The aluminium ingots were inputs for the manufacture of castings. The castings were cleared following the Chapter X procedure referred above. The argument that the duty was remitted and not exempted has been rejected by holding that the petitioners rightly understood the later part of Rule 57C, namely, the castings are chargeable to nil rate of duty. In the present case, the petitioners state that there is a substantive right conferred by Rule 57A. What they have referred to is Rule 192. In their argument, they contended that Rule 57C will have no application. It is their case that the duty was remitted and not exempted. The petitioners also tried to explain the concept of charge at nil rate of duty. The argument essentially was that grant of remittable duty cannot be either exemption or duty being chargeable at nil rate. They explain the procedure by pointing out as to how the availment is taken. Even in this petition, they argued on the footing that they are manufacturers of castings. The castings manufactured by Petitioner No. 1 are in turn used in automobile industry. The inputs required to manufacture the said castings are aluminium ingots. The petitioners avail the credit of duty paid on these inputs under Rule 57A of Central Excise Rules, 1944, as against the duty paid on clearances of castings. The petitioners, duly maintain the register prescribed under RG 23A. At the time of clearance of castings, Petitioner No. 1 issues gate pass/invoice as per the provisions of Rule 52A and clears the same on payment of duty by debiting the amount of credit of duty maintained in said register RG 23A. The duty paid by Petitioner No. 1 on castings is in turn available for taking credit by the consignee/buyer of the castings who then utilizes the same towards payment of duty on his final (5) Appeal No. E/30091/2019 product. It is he who decides whether he should pay the duty on these inputs (castings) or should go by Chapter X procedure. The buyer of castings, therefore, has a choice to either purchase the castings against the duty paying document and then in turn avail MODVAT credit or instead of following the procedure of MODVAT credit, obtain remission of duty under Chapter X and purchase the castings without payment of duty. This choice of the buyer of the castings does not make the castings per se chargeable to nil rate of duty or wholly exempt from payment of duty.
Then, the argument was that the petitioner being manufacturer of castings at the time of receipt of inputs for manufacture of castings was not aware or cannot foresee which inputs shall be used in the manufacture of castings which the buyer decides/elects to purchase on payment of duty or on remission of duty sanctioned by the competent authority. Pertinently, the petitioners did not provide any explanation as to why they reversed the duty. The argument was that there is no one to one co-relation. Therefore, there is no bar to the petitioners availing the benefit of MODVAT credit. As long as there are clearances of final product on payment of excise duty, but admitting that some clearances of final product were without payment of duty, that the action is justified by the petitioners.
22. We are of the clear opinion that when the impugned order terms this exercise of the petitioners as jugglery, then, that finding and remark is fully justified. We have perused the entire paper book and found that there is no explanation provided, much less reasonable and plausible by the petitioners for the decision to initially reverse the MODVAT credit, but later on shifting their stand and refusing to reverse it. It is for that the show cause notices were issued and the explanation was sought. It is in that process that the petitioners relied upon all the decisions referred above. Once they had no application to the facts and circumstances of the petitioners' case, then, we do not think that the concurrent findings in the orders impugned before us to be perverse or vitiated by error of law apparent on the face of the record. In any event, the arguments that are now canvassed before us were all considered by the appellate authority. We do not think that the impugned order suffers from any serious legal infirmity requiring interference in writ jurisdiction.
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23. As a result of the above discussion, this writ petition fails. Rule is discharged. However, in the facts and circumstances of the case, there would be no order as to costs."
(2) Micro Melt Pvt. Ltd. vs. CCE [2014(300)ELT 232 (Guj.), paras 15 & 16 of which read as follows:
"15. Insofar as exemption Notification No. 6 of 2000 is concerned, goods used in the manufacture of power driven pumps, primarily designed for handling water are exempt. It was on this Notification, M/s. Shakti Pumps Ltd. was granted exemption by the excise authorities. It may be that once product is exempt from payment of duty, question of remission of duty under Chapter X of the Central Excise Rules may not arise. However, in the present case, Notification itself envisages that where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the Central Excise Rules, 1944 would be followed. Essentially Chapter X pertains to remission of duty of goods for special industrial purpose. For providing certain safeguards, to ensure that exemption granted is not misused, procedure envisaged under Chapter X is incorporated in the exemption Notification. We are of the opinion that it cannot be said that goods are of such category which would be covered under Chapter X of the Central Excise Rules, 1944.
16. In that view of the matter admittedly, fact being that M/s. Shakti Pumps Ltd. was granted exemption under Notification No. 6 of 2000 with respect to its product, assessee herein would be covered within the requirement of Rule 57CC of the Central Excise Rules. The assessee is therefore, not entitled to refund of Modvat credit used for payment of duty on such goods."
7. He fairly concedes that these binding precedents were not brought to the notice of this Bench when the previous orders were passed but prays that their ratio may be followed now. He further submits that there is a factual error in both the orders of Dharamsi Morarji Chemical Co. Ltd. (supra) of the Tribunal Mumbai and also the orders of this Bench for the earlier periods. Both mentioned that Chapter X procedure was being (7) Appeal No. E/30091/2019 followed. He would submit that Chapter X refers to the Chapter in Central Excise Rules 1944 which have been superseded by Notification No. 9/2001- CE(NT), dated 01.03.2001 and further by Central Excise Rules 2002. Chapter X was not on the statute book during the relevant period at all. Therefore, any reference to Chapter X is factually not correct. He submits that prior to 2001, Chapter X of Central Excise Rules 1944 provided for "Remission of duty on goods cleared for special industrial purposes". The dispute in the case of SRF Limited (supra) and other judgments during the relevant period was whether this remission under Chapter X would amount to nil rate of duty or being fully exempted and if so whether MODVAT credit is admissible under the erstwhile Central Excise Rules, 1944. After 2001, these rules no longer exist. For the period relevant in this appeal, the rules in question were "Central Excise (Removable of Goods at Concessional Rate of Duty for Manufacture of Excisable and other Goods) Rules 2001. These rules did not provide for remission of duty but only prescribed for a procedure to be followed by a manufacturer who intends to avail the benefit of the notification issued under Sub Section 1 of Section 5A of Central Excise Act, 1944 granting exemption of duty to excisable goods when used for purposes specified in the notification. In other words, the provision for remission of duty no longer exists after 2001. Since the new rules only deal with granting exemption of duty and the procedure to be followed to avail the exemption, there is no question of remission under the present system. The notification in question is Notification No. 82/84-CE, dated 31.03.1984 as amended by Notification No. 20/2006 which reads as follows:
"GENERAL EXEMPTION No. 46Exemption to all capital goods, components and Raw materials cleared for repair of goods falling under Heading 89.01, 89.02, 89.04 and 89.05 (excluding float or submersible drilling or production platforms) and 89.06.
[Notfn. No. 82/84-CE, dated 31.03.1984 as amended by Notfn. Nos.
80/86, 227/87, 15/91, 96/95, 35/01 and 20/06] (8) Appeal No. E/30091/2019 In exercise of the powers conferred by Sub Rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts all capital goods, components and raw materials, falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and cleared for repair of goods falling under Heading 8901, 8902, 8904 and 8905 (excluding floating or submersible drilling or production platforms) and 89.06, by ship repair units, from the whole of the duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944 (1 of 1944). Provided that-
(i) The manufacturer of the said capital goods, components and raw materials produces, before the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction over the factory, a certificate from the indentingship repair unit that the said capital goods, components and raw materials are required solely for the purpose of the repair of goods falling under Heading Nos. 8901, 8902, 8904 and 8905 (excluding floating or submersible drilling or production platforms) and 8906 and that the ship repair unit is registered with the Director General of Shipping, Government of India, for this purpose; and
(ii) The procedure set out in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 is followed."
8. As is evident from the above notification, the benefit claimed by the appellant is of exemption available subject to some conditions. It is a conditional notification which the appellant chose to avail of in respect of some clearances and not avail in respect of other clearances. The mere fact that the exemption is conditional, does not make it not an exemption. He argued that there are several exemption notifications which are conditional such as, exemption based on value of clearances, or exemption in respect of goods of a particular specification or exemption of goods made for a particular use. In all these cases, the exemption notification is treated as an exemption. If the assessee chooses to avail exemption, the goods in question are treated as fully exempt and accordingly no CENVAT Credit is admissible to that extent. In case the CENVAT availed inputs are used both for manufacture of goods on which duty is paid and goods on which exemption is claimed, the provisions of Rule 6 of CCR 2004 would apply. He also draws the attention of the Bench to the fact that the exemption (9) Appeal No. E/30091/2019 notification nowhere specifies about remission or following the procedure under Chapter X. Therefore, the order of the Tribunal in the case of S.R.F. Limited (supra) as upheld by Hon'ble Apex Court which was in the context of Chapter X procedure and the remission therein does not apply because the rules have changed and the remission no longer exists. He, therefore, argues that regardless of the earlier decisions, there is a clear exemption notification and where the exemption notification exists, the question of remission under Chapter X does not arise, as has been held by Hon'ble High Court of Gujarat in the case of Micro Melt Pvt. Ltd. (supra).
9. I have considered the arguments on both sides and perused the records. I find that several appeals in respect of same appellant for the earlier periods on the same issue, were allowed relying on the case of Dharamsi Morarji Chemical Co. Ltd. (supra) holding that the clearances under Chapter X procedure without payment of duty does not amount to goods being exempt from payment of duty or being chargeable to nil rate of duty. Ld. DR is correct in pointing out that Chapter X procedure is no longer in statute book and the question of remission under Chapter X does not apply any longer. The procedure prescribed for Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and other Goods) Rules 2001 make no mention whatsoever about remission of duty but only refer to the benefit of exemption notification issued under Section 5A (1) of Central Excise Act, 1944.
10. It would be profitable to discuss relevant legal provisions of Central Excise at this stage:
(a) Levy of Central Excise Duties Section 3 is the charging section for levy of duties of excise on excisable goods manufactured or produced in India. (Excisable goods are defined in section 2(d) as goods specified in the first and second schedules to the central excise tariff Act, 1985). Section 4 and Central Excise Valuation Rules spells out the method by which the goods should be valued for calculating the excise duty. The (10) Appeal No. E/30091/2019 Schedules to the Central Excise Tariff Act,1985 determine the rates at which the central excise duties have to be levied on different excisable goods. If there is any non-levy or short levy or non- payment or short payment of duties, a demand can be raised under Section 11A. If there is any excess payment, the assessee or the person who bore the burden of the duty can claim refund under Section 11B.
(b) Exceptions to the levy and collection of central excise duties:
The following are the exceptions to the levy and collection of central excise duties.
(i) Remission due to deficiency due to natural causes:
Section 5 provides for remission of duty on goods found deficient in quantity due to any natural causes.
(ii) Rebate of duty when goods are exported after paying the duty (Rule 18 of Central Excise Rules, 2002): Where a manufacturer pays duty, clears the goods and then exports, the amount of central excise duty is paid back to them as rebate.
Rebate is also included in the definition of refund under Section 11B.
(iii) Export of goods without paying duty (Rule 19 of the Central Excise Rules, 2002): When a manufacturer chooses to not pay duty before exporting, he can do so by executing a bond (or a running bond covering several transactions) undertaking to export the goods and produce proof of export. Both rebate (under Rule 18) and export under bond (Rule 19) are based on the generally accepted principle that goods should be exported but not the taxes on them.
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(iv) Exemption from payment of duty by notifications issued under Section 5A of the Central Excise Act, 1944: This section empowers the Central Government to issue notifications exempting goods from payment of duties either fully or partially and whether unconditionally or subject to some conditions. When a notification is issued, the tariff rate for the goods must be read with the exemption notification and duty must be paid accordingly. Whether the tariff rate itself is NIL or the exemption notification exempts the goods from the whole of duty, no duty is payable. If the exemption notification is conditional, it applies to those who fulfil the conditions and not to others. Conditional notification can also grant full exemption or partial exemption.
(v) Remission of duty under Chapter X of the erstwhile Central Excise Rules, 1944 : These rules provided for a procedure for remission of duty for goods used for special industrial purposes subject to following of the prescribed procedure (Rules 192 to 196BB).
(c) Changes in the law: The Central Excise Rules, 1944 were rescinded by Notification No. 9/2001 -CE (NT) dated 1-3-2001 with effect from 1 July 2001. Thus, Chapter X ceased to exist since 1 July 2001. They were replaced by Central Excise Rules, 2001 and after a few subsequent changes, the Central Excise Rules, 2002 were framed which were applicable during the period relevant to this case. While the erstwhile rules covered all aspects, in the new system several sets of rules were framed covering different aspects of Central Excise. The erstwhile rules provided for MODVAT - a system by which the manufacturer could take credit of the duty paid on their inputs and use it to pay duty on their final products. These were replaced by CENVAT credit Rules the Rules relevant for the period in question are Cenvat Credit Rules, 2004. The procedure of Remission (12) Appeal No. E/30091/2019 of duty under Chapter X of the Central Excise Rules, 1944 has been replaced by Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The new Rules have, instead of Remission, provided for a procedure to claim benefit of an exemption notification issued under Section 5A for the purpose. Thus, the concept of remission of duty for goods used for special industrial purposes under Chapter X has been done away with and only a procedure to claim an exemption has been introduced in 2001. Rule 192 of Chapter X of the erstwhile Rules which provided for remission read as follows:
"CHAPTER X REMISSION OF DUTY ON GOODS USED FOR SPECIAL INDUSTRIAL PURPOSES
192. Application for concession.- Where the Central Government has, by notification under rule 8 or section 5A of the Act, as the case may be, sanctioned the remission of duty on excisable goods, other than salt, used in a specified industrial process, any person wishing to obtain remission of duty on such goods, shall make application to the Commissioner in the proper Form stating the estimated annual quantity of the excisable goods required and the purpose for and the manner in which it is intended to use them and declaring that the goods will be used for such purpose and in such manner. If the Commissioner is satisfied that the applicant is a person to whom the concession can be granted without danger to the revenue, and if he is satisfied, either by personal inspection or by that of an officer subordinate to him that the premises are suitable and contain a secure store-room suitable for the storage of the goods, and if the applicant agrees to bear the cost of such establishment as the Commissioner may consider necessary for supervising operation in his premises for the purposes of this Chapter, the Commissioner may grant the application, and the applicant shall then enter into a bond in the proper Form with such surety or sufficient security, in such amount and under such conditions as the Commissioner approves. Where, for this purpose, it is necessary for the applicant to obtain an Excise registration certificate, he shall submit the requisite application along with the proof for payment of registration certificate fee and shall then be granted a registration certificate in the proper Form. The concession shall, unless renewed by the Commissioner, cease on the expiry of the registration Certificate:
Provided that, in the event of death, insolvency or insufficiency of the surety or where the amount of the bond is inadequate, the Commissioner may, in his discretion, demand a fresh bond; and may, if the security furnished for a bond is not adequate, demand additional security."
(13) Appeal No. E/30091/2019 Sections 1 & 2 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules 2001 read as follows:
" 1) These rules may be called the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.
(2) They extend to the whole of India (3) They shall come into force on and from the1st day of July, 2001.
2 Application.-
These rules shall apply to a manufacturer who intends to avail of the benefit of a notification issued under sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Act) granting exemption of duty to excisable goods (hereinafter referred to as subject goods) when used for the purpose specified in that notification.
3. Application by the manufacturer to obtain the benefit.-
(1) A manufacturer who intends to receive subject goods for specified use at concessional rate of duty, shall make an application in quadruplicate in the Form at Annexure-I to the jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be (hereinafter referred to as the said Assistant Commissioner or Deputy Commissioner)."
Evidently, remission has been done away with in 2001 for this purpose.
(d) When is CENVAT Credit (or the erstwhile MODVAT credit) not available? Credit is not available when either the goods are chargeable to Nil rate of duty (i.e., the rate of duty prescribed in the Tariff itself is zero) or the goods are fully exempt. (CENVAT under Rule 6 of the Cenvat credit Rules, 2004 and MODVAT under Rule 57C of Central Excise Rules, 1944). The question is whether credit can be denied in cases other than NIL rate of duty or full exemption where no duty is paid for other reasons. Eg: Export under bond, Remission when goods are lost/destroyed (or found deficient in quantity due to natural causes) or remission claimed under Chapter X of the erstwhile Central Excise Rules, 1944. The issues pertaining to (14) Appeal No. E/30091/2019 export of goods under bond and remission of duty for goods cleared under Chapter X procedure were decided in the cases indicated in
(e), (f) and (g) below.
(e) Export under bond without payment of duty: In the following cases it was decided that MODVAT credit was available where the goods are chargeable to duty but were exported without payment of duty under Bond.
(i) Alpha Drug India Ltd. v. CCE, Chandigarh - 2000 (118) E.L.T. 783 (T)
(ii) India Poly Fibres Ltd. v. CCE, Allahabad - 1999 (111) E.L.T. 748 (T)
(iii) Reliance Industries Ltd. v. CCE, Bombay - 1995 (78) E.L.T. 595 (T)
(iv) J.K. Synthetics Ltd. v. CCE, Jaipur - 1996 (87) E.L.T. 389 (T)
(v) Orissa Synthetics Ltd. v. CCE - 1995 (77) E.L.T. 350 (T).
(f) Remission of duty under Chapter X procedure: In the case of Commissioner of Central Excise, Indore vs SRF Ltd. 2008 (223) E.L.T. 508 (Tri. - Del.) (decided on 7-11-2003) the same logic as was applied to exports under bond, was extended to the goods supplied claiming remission under Chapter X of Central Excise Rules, 1944 and it was held that MODVAT was available. Civil Appeal CA No. 195of 2005 filed by the Department was dismissed by the Hon'ble Apex Court as reported in [Commissioner v. SRF Limited - 2010 (255) E.L.T. A13 (S.C.)]
(g) In the case of Atlas Automotive components Pvt. Ltd. vs UOI (2017 (350) ELT 42(Bom), the Hon'ble High Court rejected that argument that remission of duty for goods cleared under Chapter X procedure is not equivalent to exemption or payment at nil rate and hence MODVAT credit need not be reversed. In the case of Micro Melt Pvt. Ltd. (2014 (300) ELT 232 (Guj), the Hon'ble High Court took a similar decision.
11. The present appeal pertains to the period long after the Chapter X procedure and the remission of duty under it have been superseded by new Central Excise (Removal of Goods at Concessional Rate of Duty for manufacture of Excisable Goods) Rules 2001 which do not provide for remission at all but only prescribe a procedure to be followed to avail an exemption notification issued under Section 5A of the Act. The earlier (15) Appeal No. E/30091/2019 appeals of the same appellant were decided relying on the order of Mumbai Bench of the Tribunal in the case of Dharamsi Morarji Chemical Co. Ltd. (supra) in which it was examined whether credit should be denied under Rule 6 of CCR ,2004 when Chapter X procedure was followed. In 2004, there was no Chapter X procedure or the remission of duty thereon and when there was Chapter X procedure there were no CCR, 2004 but only earlier MODVAT Rules. The earlier appeals of the same appellant decided by this bench were also on the same lines. Now that this error in factual legal position is raised by the Ld. Departmental Representative, I proceed to decide this appeal taking this into account. On a specific query from the bench whether Revenue has appealed against the previous orders of this bench, Ld. Departmental Representative states that they were not appealed against as the value was below the threshold as per the litigation policy and it does not mean that they have acquiesced to the matter on merits.
12. In the present system, the Central Excise duty is leviable on all excisable goods which are manufactured or produced at the rates set out in the schedule to Section in Central Excise Tariff Act 1985 read with any exemption notification. The exemption notifications provide for either full exemption or partial exemption. Further, they can provide for either conditional exemption or unconditional exemption. If the exemption notification is an unconditional one, it applies to all persons and all clearances. If it is a conditional one, it applies to such persons and clearances as may meet the conditions. A person who is entitled to the exemption may chose not to fulfil the conditions and not to claim the exemption notification also. Further, it is also possible that the same person may clear the same goods, some claiming a conditional exemption and others without conditional exemption and paying duty. Nevertheless, all these categories fall under the category of exemption as is evident from the plain reading of Section 5A. The CENVAT Credit Rules, 2004 provide for credit of duty paid on inputs subject to the condition that the final products are not either chargeable to nil rate of duty or are fully exempted. The full exemption depends upon, in cases of conditional exemption notifications, whether the person is eligible for the exemption and chooses to fulfil those (16) Appeal No. E/30091/2019 conditions or otherwise. For instance, a Small Scale Industry may be fully exempted up to some limit and thereafter will be liable to pay Excise Duty. As long as they are exempted from payment of duty (although the exemption is subject to the condition of value of clearances), they are not entitled to CENVAT Credit. The day they start paying duty, they will be entitled to the benefit of CENVAT Credit. It does not also matter what the conditions of exemption notification are. In the present case, the condition of the exemption notification 82/84-CE as amended is that the assessee has to get a certificate from the jurisdictional Asst. Commissioner or Dy. Commissioner and that they have to follow the procedure set out in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. To the extent the goods are cleared availing the benefit of this exemption, they are fully exempted and not otherwise.
13. Ld. DR was correct in pointing out that in the present case there is not a case of Chapter X procedure and consequential remission of duty. He was also correct in pointing out that both these both these concepts did not exist in the statute book at all during the relevant period and therefore cannot be considered for the present appeal. At present, remission of duty is confined only to remission of duty on goods found deficient in quantity due to natural causes under Section 5. Remission under Chapter X does not exist. He is correct in pointing out that earlier orders of this Bench have incorrectly held that Chapter X procedure applies. He is also correct in pointing out that similar was the case of Dharamsi Morarji Chemical Co. Ltd. (supra) as that matter also pertain to the period after the Central Excise Rules 1944 including the provision of remission under Chapter X were superseded. He is also correct in pointing out that Hon'ble High Court of Bombay had dismissed the departmental appeals on grounds of non prosecution in that case. From a perusal of the order of Dharamsi Morarji Chemical Co. Ltd. (supra) and the previous final orders of this Bench, this legal position does not appear to have been contested by the department.
(17) Appeal No. E/30091/2019
14. Where there is an exemption notification, exempting the goods from payment of Central Excise duty, the Hon'ble High Court of Gujarat in the case of Micro Melt Pvt. Ltd. (supra) held that the question of remission does not arise. In the present case, anyway, the provisions for remission themselves do not exist.
15. I am fully conscious of the fact that this very Bench in the earlier orders in respect of the same appellant has held in favour of the assessee holding that the clearances under chapter X procedure cannot be equated with the goods which are fully exempt from payment of duty. However, Chapter X procedure did not exist on the Rule book during the relevant period and is also not on the Rule book now. Therefore, the questions of remission under Chapter X or it being a distinct genus than the exemption do not apply. Now, there is only an exemption.
16. In view of the above, I find that the appellant, having cleared the goods on claiming full exemption from payment of duty, are not entitled to CENVAT Credit to that extent and are required to reverse CENVAT Credit or pay an amount as per Rule 6 of CCR 2004. I, therefore, find that the impugned order is correct and requires no interference and the appeal needs to be rejected and I do so.
17. The appeal is rejected and the impugned order is upheld.
(Order pronounced in open court on 03.06.2019) (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) Vrg