2014 (6) TMI 271 - AT - Central Excise

Tribunal grants appeal on exemption choice & allows CENVAT Credit for exported goods

The Tribunal allowed the appeals, determining that the appellants could choose the more beneficial notification when two exemption notifications were ... Cenvat / Modvat Credit - export of exempted cotton fabrics - Simultaneous availment of exemption under Notification No.29/2004-CE and 30/2004-CE both dated 09.07.2004 - Whether it is the choice of the assessee to select any notification and pay duty or avail exemption when two notifications, one granting absolute unconditional exemption to excisable goods and the other granting unconditional partial exemption to the said goods, are operative simultaneously and whether Section 5A(1A) of the Central Excise Act, 1944 would be applicable - Held that:- when two exemption notifications, one granting absolute unconditional exemption to excisable goods and the other granting unconditional partial exemption to the said goods, are operative simultaneously, it is the choice of the appellant to opt for that notification which is more beneficial to him. In the present facts and circumstances of these appeals, provisions of Section 5A(1A) of the Central Excise Act, 1944 are not applicable. Provisions of sub-rule 57C(1) are satisfied as stipulated under Rule 57C(2) as well as Rule 57CC(6)1 and there was no need to comply with the provisions of rule 57CC1). Therefore, it is clear that an amount of 8% of the price of the goods exported is not required to be paid irrespective of whether the exported goods are exempted or otherwise - Even though Rule 6(1) of the Cenvat Credit Rules, 2004 provides that no Cenvat credit will be available in respect of the inputs used in the manufacture of exempted products, Rule 6(6)(v) of the Cenvat Credit Rules creates an exemption inter alia in respect of the excisable goods removed without payment of duty for export under bond in terms of Central Excise Rules, 2002. Considering the language of Rule 6(6)(v) of the Cenvat Credit Rules, 2004 the petitioners are entitled to avail Cenvat credit in respect of the inputs used in the manufacture of the final products being exported irrespective of the fact that the final products are otherwise exempt. Provisions of Rule 6(1) of Cenvat Credit Rules are not attracted in the present facts and circumstances when 100% cotton fabrics attracting nil rate of duty are exported and CENVAT Credit was not deniable to the appellants - Decided in favour of assessee. Issues Involved:1. Choice of Notification and Applicability of Section 5A(1A) of the Central Excise Act, 1944.2. Applicability of Rule 6(1) or Rule 6(6) of the CENVAT Credit Rules, 2004.Issue-wise Detailed Analysis:1. Choice of Notification and Applicability of Section 5A(1A) of the Central Excise Act, 1944:The appellants contended that when two notifications are operative, it is the choice of the assessee to select any notification and either pay duty or avail full exemption. They argued that Section 5A(1A) applies only if there is a single notification exempting goods absolutely. The Revenue, however, argued that the appellants could not opt for payment of duty at 4% under Notification No.59/2008-CE when the goods were unconditionally exempted from payment of duty under Notification No.29/2004-CE as amended on 07.12.2008.The Tribunal found that this issue is no longer res integra and has been decided by the Supreme Court in several cases. In Collector of Central Excise, Baroda Vs. Indian Petro Chemicals, the Supreme Court held that when two exemption notifications are applicable, the assessee can choose the more beneficial one. Similarly, in Share Medical Care Vs. Union of India, the Supreme Court reiterated that if an applicant is entitled to benefits under two different notifications, they can claim the more beneficial one. The Delhi High Court in Grand Card Industries also held that a manufacturer should have the right to choose the more attractive and beneficial option when covered under both the MODVAT scheme and an exemption notification.Based on these precedents, the Tribunal held that when two exemption notifications are operative simultaneously, it is the choice of the appellant to opt for the more beneficial notification. Therefore, the provisions of Section 5A(1A) of the Central Excise Act, 1944, were not applicable in this case.2. Applicability of Rule 6(1) or Rule 6(6) of CENVAT Credit Rules, 2004:The appellants argued that they claimed duty payment and availed CENVAT Credit only when the goods were exported, aligning with Government Policy that duty paid on inputs used in exported goods should be available as a refund. They contended that Rule 6(1) of CENVAT Credit Rules, 2004, was not applicable and Rule 6(6) should apply. They cited several case laws, including Repro India Limited Vs. Union of India, where the Mumbai High Court held that Rule 6(6)(v) allows for CENVAT Credit on inputs used in the manufacture of goods exported under bond, even if the final products are otherwise exempt.The Tribunal noted that the provisions of Rule 6(6)(v) of the CENVAT Credit Rules, 2004, explicitly state that the restrictions of sub-rules (1), (2), (3), and (4) do not apply when the excisable goods are cleared for export under bond. The Himachal Pradesh High Court in Commissioner of Central Excise Vs. Drish Shoes Ltd. also held that an assessee manufacturing goods chargeable to nil duty is eligible for CENVAT Credit on inputs if the goods are exported.In view of these legal positions, the Tribunal concluded that Rule 6(1) of the CENVAT Credit Rules was not attracted in the present case when 100% cotton fabrics attracting nil rate of duty were exported. Therefore, CENVAT Credit was not deniable to the appellants.Conclusion:The Tribunal allowed the appeals, holding that the appellants had the right to choose the more beneficial notification and that CENVAT Credit was permissible under Rule 6(6) of the CENVAT Credit Rules, 2004, for goods exported under bond. The operative part of the order was pronounced in the Court.