Custom, Excise & Service Tax Tribunal
Jolly Board Ltd vs Commissioner Of Central Excise on 6 January, 2014
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No. E/1865,1866/10 Mum
E/1528 to 1530/11 & E/956/12-Mum
(Arising out Order-in-Appeal No. AGS (204-205) 177, 198/2010 dated 19.08.2010 passed by the Commissioner of Central Excise (Appeals), Aurangabad)
For approval and signature:
Honble Mr. Ashok Jindal, Member (Judicial)
1. Whether Press Reporters may be allowed to see No
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 Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Jolly Board Ltd.
Appellant
Vs.
Commissioner of Central Excise,
Respondent
Appearance:
Shri H.S. Shirsat, Consultant for the appellant Shri Navneet, Addl.Comm (AR) for the respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Date of hearing : 06/01/2014 Date of decision : 06/01/2014 O R D E R No:..
The appellants are in appeals against the impugned orders wherein refund claim filed under Notification 5/2006 was denied to them on the premise that as the appellant are manufacturers of exempted goods, therefore, as per Rule 6(1) of the CENVAT Credit Rules, 2004 they are not entitled to take input credit. Consequently, they are not entitled to file refund claim under Notification 5/2006. Another reason for deny of refund claim is that as the goods were not exported under bond, therefore provisions of Rule 6(6)(v) of CENVAT Credit Rules, 2004 are not applicable to the facts of this case.
2. The ld. consultant appeared on behalf of the appellant submits that it is not in dispute that they have paid duty on the inputs/input service which were gone in the manufacturing of export goods which were exempted product. It is further submitted that as goods were exempted, there is no question of execution of bond as there is no duty involved. He further submits that this issue came up before this Tribunal in Jobelle vs. CCE 2006 (203) ELT 627 and before the Hon'ble High Court in CCE vs. Drish Shoes Ltd. 2010 (254) ELT 417 and Repro India Ltd. vs. UOI 2009 (235) ELT 614 (Bom) where the refund of CENVAT credit was allowed of input/input service used in the exempted goods when exported under Rule 5 and proviso to Rule 6(1) is not attracted in view of the Rule 6(6)(v) of the CENVAT Credit Rules, 2004. He further submits that the non-execution of bond when goods are exported is not in dispute, it is only a technical lapse. To support he relied on Paras Ship Breakers Ltd. 2003 (159) ELT 734. He also submits that refund under Rule 5 can be allowed even when exempted goods are not exported under bond. To support this contention, he relied on Well Known Polyester Ltd. 2011 (267) ELT 221. The said decision is accepted by the department also.
3. On the other hand, ld. AR strongly opposed the contention of the ld. consultant who submits that it is not in dispute that the goods manufactured by the appellant are exempted goods. Therefore as per Rule 6(1) of CENVAT Credit Rules, 2004, they are not entitled to avail credit on inputs/input service which were used in the manufacturing of exempted goods. He further submits that the provisions of Rule 6(6)(v) of CENVAT Credit Rules, 2004 are also not applicable. The fact is as admitted that the goods have been exported without executing any bond. As the appellant has not contested the eligibility of the inputs/input service proposed to be deny in the show-cause notice therefore they are not entitled for the same. He further submits that as per amendment in Notification 42/01 by virtue of Notification 24/10 dated 06.05.2010 the appellant are not entitled to take credit itself. There is a separate procedure under Rule 18 of the Central Excise Rules, 2002 to claim refund/rebate of the inputs when manufacturing of exempted goods.
4. Heard both sides.
5. In this case the appellant has procured inputs/input service on payment of duty which were gone in the manufacturing of exempted goods which were exported by the appellant. These facts are not in dispute. The intent of the legislation is not in dispute that the taxes are not to be exported. The same issue came up before Jobelle (supra) wherein this Tribunal held that the sub-rule (5) makes an exception when exempted finished goods are either cleared to a free trade zone, SEZ, 100% EOU or are cleared for export under Bond without payment of duty. If the goods are exported on payment of duty after taking credit of duty paid on the inputs and utilizing the same, then the question of refund of input duty would not arise. But is clearly the Government s policy not to export the domestic duties, on the finished goods or on the inputs, to the International market. If refund of input duty credit is not allowed, the goods will become costly in International market and less competitive.
6. Further, this issue came up before the Hon'ble High Court in the case of Drish Shoes Ltd. (supra) wherein the facts were the assessee were manufacturers of finished leather and finished leather was exported. After export they claimed refund on account of CENVAT credit paid on inputs, which were purchased for finishing the export goods. Refund was sought to be denied under provisions of Rules 5 and 6 of CENVAT Credit Rules, 2002. Thereafter the Hon'ble High Court examined the issue and held as under:
16. The Scheme of? CENVAT Credit Rules, 2002, as also 2004, reference to the relevant provisions of which has been made hereinabove, shows that CENVAT credit/refund is allowed on the inputs of all manufactured goods which are not exempt from duty, as is clear from a combined reading of Rule 3 and sub-rule (1) of Rule 6 of the CENVAT Credit Rules, 2002, as also the Rules of 2004, so as to avoid indirect double taxation on inputs. However, this rule is not absolute. It is subject to exception clause, contained in Rule 6(5) of the Rules of 2002 and 6(6) of the Rules of 2004, and one of the exceptions is in respect of excisable goods, which are cleared for export under bond in terms of the provisions of Central Excise Rules, 2002.
17. Sub-rule (5) of Rule 6 of the Rules of 2002 was applicable only in case of exempted goods. That meant that the exception was not applicable in case of dutiable goods. It appears that this led to anomalous situations. For example, if the goods were dutiable and were exported, credit for CENVAT could not be claimed in respect of input of those goods, at least under the aforesaid exception clause. To overcome this kind of anomalous situations, exception clause contained in sub-rule (6) of Rule 6 of CENVAT Credit Rules, 2004 has been made applicable to all excisable goods.
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.
7. The issue also came up before the Hon'ble High Court of Bombay in Repro India Ltd. (supra) wherein the Hon'ble High Court held that CENVAT credit used in the manufacture of final product being exported irrespective of the fact that final product are otherwise exempted by provisions of Rule 6(6)(v) of the CENVAT Credit Rules, 2004 are applicable. Further, I find that in the case of Salzer Controls Ltd. 2003 (160) ELT 1169 and Paras Ship Breakers Ltd. this Tribunal has held that non-execution of bond are only technical lapse. Further, in the case of Well Known Polyester Ltd. (supra) wherein the exempted goods were exported without bond or LUT by an assessee who was not even registered with the Central Excise department. This Tribunal has held that execution of bond/LUT was only procedural lapse for which refund could not be denied.
8. Admittedly, in this case, appellant has not executed any bond for export of the goods. If the goods are exempted, execution of bond was not required.
9. In these circumstances, relying on the above cited decisions, I hold that the appellant are entitled for refund claim. Accordingly, appeals are allowed with consequential relief.
(Dictated in Court) (Ashok Jindal) Member (Judicial) //SR 6