2019 (1) TMI 2032 - AT - Customs

Tribunal grants exemption for imported fertilizer under specific notifications, citing inability to avail CENVAT credit.

The tribunal held that the appellant was entitled to the benefit of exemption notifications 01/2011-CE and 02/2011-CE for their imported fertilizer, ... Benefit of exemption notification 01/2011-CE or 02/2011-CE - import of Muriate of Potash - appellant has not manufactured but has imported the goods and hence it is impossible to verify whether any CENVAT credit has been availed or not and therefore no exemption notification is available to them - HELD THAT:- It is true that any exemption notification must be strictly construed against the assessee who is claiming the benefit of the same. In this case, the only point of dispute is whether or not the CENVAT credit has been availed for the goods in question. It is not in dispute that the goods have been imported and therefore were manufactured outside India. The CENVAT Credit Rules, 2004 or CENVAT Credit Rules, 2002 are framed under the Central Excise Act, 1944. This Act applies to the whole of India but not beyond. When the Central Excise Act itself does not extend outside India, neither will the CENVAT Credit Rules. Therefore, it is impossible for anyone outside India to avail the benefit of CENVAT credit. Therefore, in respect of imports, it is impossible that the condition of CENVAT credit not being availed is not fulfilled. This has been decided by the Hon’ble Apex Court in the case of M/S SRF LTD., M/S ITC LTD VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, COMMISSIONER OF CUSTOMS (IMPORT AND GENERAL) , NEW DELHI [2015 (4) TMI 561 - SUPREME COURT] - following the ratio of the judgment of the Hon’ble Apex Court and hold that the appellant is entitled to the benefit of the exemption notifications 01/2011 & 02/2011- CE in respect of their imports. The impugned orders are set aside and the appeals are allowed. Issues involved:- Entitlement to benefit of exemption notification 01/2011-CE or 02/2011-CE for imported fertilizer (Muriate of Potash)Detailed Analysis:The main issue in the appeals was whether the appellant was entitled to the benefit of exemption notifications 01/2011-CE or 02/2011-CE for the imported fertilizer, Muriate of Potash. The dispute revolved around the condition in the exemption notifications that no CENVAT credit should have been availed in the manufacture of the goods. The appellant claimed that since the manufacturer of the product was located outside India, it was impossible for them to avail CENVAT credit. The revenue argued that since the appellant imported the goods, it was impossible to verify if any CENVAT credit had been availed, thus making them ineligible for the exemption. The case hinged on the interpretation of the exemption notifications, which are to be strictly construed against the party claiming the benefit.The appellant cited a judgment by the Hon’ble Supreme Court in the case of Enterprises International Ltd, which held that the condition related to non-availment of CENVAT credit does not bar the benefit of Central Excise exemption notifications for calculating additional duty of customs on imports. The departmental representative, however, maintained that the burden of proving that the conditions of the exemption notifications had been met rested on the appellant, and they had not discharged this burden. The lower authority supported this view, emphasizing the need to show fulfillment of conditions to claim the benefit of conditional exemption notifications.After considering the arguments from both sides and examining the records, the tribunal addressed the critical point of dispute regarding the availing of CENVAT credit for the imported goods. It was noted that the Central Excise Act, under which the CENVAT Credit Rules are framed, applies only within India and not beyond. As the goods in question were imported and manufactured outside India, it was deemed impossible for anyone outside India to avail the benefit of CENVAT credit. The tribunal relied on a judgment by the Hon’ble Apex Court in the case of SRF Ltd, which established that in the context of imports, the condition of CENVAT credit not being availed was automatically fulfilled. Therefore, the tribunal held that the appellant was entitled to the benefit of the exemption notifications 01/2011-CE and 02/2011-CE for their imports, setting aside the impugned orders and allowing the appeals.