2012 (8) TMI 720 - CGOVT - Central Excise

Duty Exemption & Cenvat Credit: Compliance is Key

The case involved M/s. Mittal Clothing Co. availing duty exemption under Notification No. 30/2004 but was found to have irregularly availed cenvat credit ... Cenvat credit – rebate claim on export of goods - applicant is a manufacturer of readymade garments - applicant have availed cenvat credit on inputs contrary to the conditions stipulated under Notification 30/2004 – Held that:- When goods are exempted from payment of duty, no cenvat credit is permissible under Rule 6(1) of the Cenvat Credit Rules, 2004. Even the Cenvat Credit on the input services is not allowed for exempted goods - applicant has not declared on ARE-1s that they are clearing the goods under Notification No. 29/2004-C.E., on payment of duty whereas they were clearing the goods for home consumption under Notification No. 30/2004-C.E., at nil rate of duty - applicant was not allowed to pay duty on the exempted goods as per proviso to Section 5A(1A) of Central Excise Act, 1944 and no Cenvat Credit on the input services is available under Rule 6(1) of the Cenvat Credit Rules, 2004. Issues:1. Availment of cenvat credit on inputs contrary to conditions stipulated under Notification 30/2004.2. Rejection of rebate claim based on the irregular availment of credit.3. Allegations of non-fulfillment of conditions under Rule 18 and Notification 19/2004-C.E. (N.T.).4. Grant of rebate on duty paid goods exported.5. Connection between rebate of duty paid on exported goods and Cenvat Credit Rules.6. Differentiation between Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E.7. Permissibility of granting rebate despite procedural lapses.Analysis:1. The case involves M/s. Mittal Clothing Co., a manufacturer of readymade garments availing duty exemption under Notification No. 30/2004. The dispute arose when the applicant was found to have availed cenvat credit on inputs contrary to the conditions specified under the notification. The rejection of the rebate claim was based on this irregularity, as the applicant utilized the credit for duty payment on exports instead of reversing it upon opting for the exemption.2. The applicant contested the rejection on various grounds, including the nature of the rebate claim on accumulated credit for input services, compliance with Rule 18 and Notification 19/2004-C.E. (N.T.), and the precedent of granting rebate on duty-paid goods exported. The applicant argued that the rejection of the rebate claim would lead to injustice, emphasizing the distinction between the processes of availing credit and claiming rebate.3. The Government's observations focused on the applicant clearing goods under claim of rebate while availing exemption under Notification No. 30/2004, where no cenvat credit is allowed. The authorities rejected the rebate claims in line with this regulation, highlighting that when goods are exempted from duty payment, no cenvat credit is permissible under the Cenvat Credit Rules.4. Despite circulars allowing simultaneous availment of multiple notifications with conditions, the applicant failed to declare the clearance of goods under the relevant notifications accurately. The Government emphasized that the applicant's actions did not align with the provisions of Section 5A(1A) of the Central Excise Act and Rule 6(1) of the Cenvat Credit Rules, leading to the rejection of the revision application and upholding of the order-in-appeal.5. The judgment reinforces the strict adherence to excise duty regulations, particularly concerning the availing of exemptions and credits, to prevent misuse and ensure compliance with the law.