2013 (7) TMI 333 - CGOVT - Central Excise

Reversal of Cenvat Credit for SEZ Supply Deemed Duty Payment, Rebate Claim Admissible

The Government concluded that the reversal of Cenvat Credit under Rules 3(4) and 3(5) constitutes payment of duty for goods supplied to SEZ, aligning with ... Nature of reversal of cenvat credit on removal of inputs as such - Rule 3(5) - Whether Duty paid by reversing the amount under Rule 3(4)/3(5) of Cenvat Credit Rules, 2004 is to be treated as payment of duty for the purpose of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 – Held that:- As per the decision of Bombay High Court in the case of CCE, Raigarh v. Micro Ink Ltd [2011 (3) TMI 1272 - BOMBAY HIGH COURT], rule 3(4) of the 2002 Rules is pari materia with Rule 57(1)(ii) of the Central Excise Rules, 1944 it is evident that inputs/capital goods when exported on payment of duty under Rule 3(4) of 2002 Rules, rebate of that duty would be allowable - Therefore entitlement to rebate of that duty cannot be faulted - Reversal of Cenvat Credit under Rules 3(4) and 3(5) is nothing but payment of duty on the goods exported/supplied to SEZ. Rule 3(6) of Cenvat Credit Rules, 2004 clearly stipulates that the amount paid under Rule 3(5) shall be eligible as Cenvat credit as if it was a duty paid by the person who removed such goods under Rule 3(5) of Cenvat Credit Rules, 2004 - Rebate claim is admissible to the applicant under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 – Decided in favor of Assessee. Issues Involved:1. Rebate claim under Section 11B of the Central Excise Act, 1944 and Rule 18 of the Central Excise Rules, 2002.2. Whether the reversal of Cenvat Credit under Rule 3(4) and Rule 3(5) of the Cenvat Credit Rules, 2004 constitutes payment of duty.3. Eligibility of rebate for supplies made to SEZ under Rule 18 of the Central Excise Rules, 2002.Issue-wise Detailed Analysis:1. Rebate Claim under Section 11B of the Central Excise Act, 1944 and Rule 18 of the Central Excise Rules, 2002:The applicants, manufacturers of Bulk Drugs and Drug intermediates, filed rebate claims for amounts paid on clearance of inputs to SEZ. The Deputy Commissioner initially granted these rebates, but the Commissioner of Central Excise, Hyderabad-III, reviewed and appealed against these orders, arguing that the claims were contrary to statutory provisions. Specifically, the Commissioner (Appeals) contended that the goods were not cleared directly from the factory of manufacture, as required under Notification No. 40/2001-C.E. (N.T.), dated 26-6-2001, and thus did not qualify for rebate under Rule 18 of the Central Excise Rules, 2002.2. Whether the Reversal of Cenvat Credit under Rule 3(4) and Rule 3(5) of the Cenvat Credit Rules, 2004 Constitutes Payment of Duty:The Commissioner (Appeals) argued that the reversal of Cenvat Credit does not equate to payment of duty, thus disqualifying the rebate claim. However, the applicants countered this by citing Rule 4 of the Central Excise Rules, 2002, which mandates that duty must be paid on excisable goods cleared from the factory or warehouse. They further referenced an explanation inserted by Notification No. 8/2007-C.E. (N.T.), dated 1-3-2007, which clarifies that duty paid using Cenvat credit is to be treated as 'duty of excise.' The applicants also cited Circular No. 283/117/96-CX, dated 31-12-1996, which supports the interpretation that reversing Cenvat credit amounts to payment of duty.3. Eligibility of Rebate for Supplies Made to SEZ under Rule 18 of the Central Excise Rules, 2002:The applicants argued that supplies to SEZ should be treated as exports, supported by Circular No. 6/2010-Cus., dated 19-3-2010, which states that rebate under Rule 18 is admissible for supplies made from DTA to SEZ. The Government reviewed the case records and observed that the applicants had supplied inputs to SEZ by debiting the Cenvat Credit account. The dispute centered on whether this debit under Rule 3(5) constituted payment of duty. The Government noted that the Hon'ble High Court of Bombay, in the case of CCE, Raigarh v. Micro Ink Ltd., had upheld that reversing Cenvat credit under Rule 3(4)/3(5) is equivalent to payment of duty for the purpose of Rule 18 of the Central Excise Rules, 2002.Conclusion:The Government concluded that the reversal of Cenvat Credit under Rules 3(4) and 3(5) is indeed payment of duty for goods supplied to SEZ. This interpretation aligns with the Hon'ble High Court of Bombay's decision and Circular No. 6/2010-Cus. Consequently, the rebate claim under Rule 18 of the Central Excise Rules, 2002, is admissible. The impugned orders of the Commissioner (Appeals) were set aside, and the original orders granting the rebate were restored. The revision applications succeeded accordingly.