2013 (9) TMI 214 - AT - Central Excise

Tribunal grants appellant choice of duty exemption & Cenvat Credit despite mixed capital goods use.

M/s. Tara Feed Ltd. Versus CCE, Chandigarh-II

The Tribunal ruled in favor of the appellant, allowing them to choose the most beneficial exemption under Notification No. 29/2004-CE and pay 4% duty ... Waiver of pre-deposit - Exemption in respect of yarn - conditional exemption - stay - Condition for availment of Exemption Notification No. 29/2004-CE – Held that:- Exemption Notification No. 29/2004-CE is an unconditional exemption which prescribes a rate of duty of 4% advelorum. There is no condition in this notification that for availing of this exemption prescribing concessional rate of duty of 4% adv., input duty Cenvat Credit must be availed. The condition of non-availment of input duty Cenvat Credit is for nil duty under Notification No. 30/2004-CE. But this does not mean that an assessee not availing input duty credit cannot avail the exemption under Notification No. 29/2004-CE, as this is an unconditional Notification. When an assessee does not avail of input duty credit, he has option to pay 4% duty under Notification No. 29/2004-CE and also the option to clear his goods at nil rate of duty under Notification No. 30/2004-CE and when two exemption Notifications are available to an assessee, he can always opt for the Notification which is most beneficial for him and in this regard the Department cannot force the assessee to avail a particular exemption Notification. Rule 6(4) of Cenvat Credit Rule, 2004 - Since capital goods have been used exclusively for manufacture of exempted goods, in view of Rule 6(4) of Cenvat Credit Rule, 2004, no Cenvat Credit would be admissibly in respect of these capital goods – Held that:- during the period of dispute the appellant was clearing the goods by availing full duty exemption as well as on payment of duty, the capital goods cannot be treated as having been used exclusively in the manufacture of exempted goods and Cenvat Credit in respect of the same cannot be demised – Requirement of pre-deposit waived. Issues:- Interpretation of exemption Notifications No. 29/2004-CE and No. 30/2004-CE- Eligibility for Cenvat Credit on capital goods- Treatment of duty payment under different exemption NotificationsInterpretation of Exemption Notifications:The case involved a dispute regarding the appellant's availing of exemption Notifications No. 29/2004-CE and No. 30/2004-CE for clearances of yarn. The Department contended that since the appellant did not avail input duty credit, they were only eligible for full duty exemption under Notification No. 30/2004-CE and not for the concessional rate of duty under Notification No. 29/2004-CE. However, the Tribunal ruled that the appellant, by not availing input duty credit, had the option to pay 4% duty under Notification No. 29/2004-CE and could choose the most beneficial exemption. The Tribunal held that the appellant's choice to pay duty under Notification No. 29/2004-CE was valid as it was an unconditional exemption without the condition of availing input duty credit.Eligibility for Cenvat Credit on Capital Goods:The Department argued that since the appellant had not exclusively used the capital goods for manufacturing exempted goods, they were not eligible for Cenvat Credit on those goods. However, the Tribunal disagreed, stating that since the appellant had cleared goods under both full duty exemption and payment of duty, the capital goods could not be considered exclusively used for exempted goods. Therefore, the Tribunal held that the appellant was eligible for Cenvat Credit on the capital goods.Treatment of Duty Payment under Different Exemption Notifications:The Tribunal found that the appellant had a strong prima facie case in their favor. Consequently, the requirement of pre-deposit of Cenvat Credit demand, interest, and penalty was waived for the hearing of the appeals, and recovery was stayed until the disposal of the appeals. The Tribunal allowed the stay applications, emphasizing the appellant's right to choose the most beneficial exemption and their eligibility for Cenvat Credit on capital goods based on the usage of the goods in manufacturing processes.