2016 (5) TMI 1106 - HC - Customs

Importers Ineligible for Central Excise Exemption on Inputs; Court Rules Against Assessee

The Commissioner of Customs (Exports) Versus M/s. Prashray Overseas Private Limited, Customs Excise & Service Tax Appellate Tribunal

The court held that the exemption under Central Excise Exemption Notification No.030/2004 is not applicable to importers as they cannot fulfill the ... Levy of CVD on import of silk fabrics - (i) Whether the imported goods are eligible for claiming benefits under the Central Excise Exemption Notification No.030/2004 dated 9.7.2004 when there was no compliance of the conditions as contemplated under the said Notification? and (ii) Whether the Central Excise General Exemption Notification No.030/2004 dated 9.7.2004 is applicable only for the indigenously manufactured goods or even for the imported goods manufactured abroad? - Held that:- in the absence of any material to show that the processes indicated above would involve inputs, none of which would attract duty of excise, it is not possible to conclude that the first respondent would satisfy both conditions namely (a) payment of duty on the inputs and (b) the non availing of CENVAT credit on the same. Though the Notification bearing No.030/2004 dated 9.7.2004 does not stipulate the first condition, we have held that the first condition is inbuilt into the second condition. Therefore, the first respondent cannot be taken to have fulfilled the condition stipulated in the proviso to the Notification No.030/2004 dated 9.7.2004, unless he had shown that in the entire process of manufacture of woven silk fabrics falling under Tariff Item No.5007, there are no inputs (used directly or indirectly and whether found in the final product or not), which attract any levy of duty under tariff items relevant to those inputs. In cases where the exemption Notification stipulates two conditions, namely that the inputs should have suffered duty and that no CENVAT credit should have been availed, then the benefit of the Notification will be available only if both conditions are satisfied. An importer will never be able to satisfy both these conditions and hence, he cannot claim the benefit. - Decided in favor of revenue. Issues Involved:1. Eligibility of imported goods for benefits under Central Excise Exemption Notification No.030/2004 dated 9.7.2004.2. Applicability of Central Excise General Exemption Notification No.030/2004 dated 9.7.2004 to indigenously manufactured goods versus imported goods.Detailed Analysis:Issue 1: Eligibility of Imported Goods for Benefits under Central Excise Exemption Notification No.030/2004 dated 9.7.2004The primary contention revolves around whether imported silk fabrics could claim exemption under Notification No.030/2004. The Notification exempts goods falling under Chapter heading 5007 from excise duty, provided no CENVAT credit has been availed on the inputs. The appellant argued that this condition could not be satisfied by an importer as the inputs used in the manufacture of imported goods would not have suffered duty of excise in India, making the importer ineligible for the exemption.The respondent countered that since the raw materials used (silk worm cocoons, raw silk, and silk waste) attract nil duty under Chapter 50, even domestic manufacturers would not be able to satisfy the condition of the proviso. Therefore, the exemption should apply to both domestic and imported goods.The court observed that the definition of 'input' under the CENVAT Credit Rules is broad, including even power consumed during manufacturing. Therefore, unless the respondent establishes that no excisable inputs were used in the manufacturing process, they cannot claim the exemption.Issue 2: Applicability of Central Excise General Exemption Notification No.030/2004 dated 9.7.2004 to Indigenously Manufactured Goods versus Imported GoodsThe appellant argued that the exemption is conditional and specific to domestic manufacturers who do not claim CENVAT credit on inputs that have already suffered excise duty. The court examined previous judgments and noted that the interpretation of exemption notifications depends on whether they impose conditions related to the payment of excise duty on inputs or procedural conditions.The court classified notifications into four types:1. Notifications with conditions related to procedural formalities.2. Notifications requiring inputs to have suffered excise duty.3. Notifications requiring inputs to have suffered excise duty and no CENVAT credit to be claimed.4. Notifications requiring no CENVAT credit to be claimed on inputs.The court concluded that the Notification No.030/2004 falls under the third category, implying that the inputs should have suffered duty and no CENVAT credit should be claimed. Given that an importer cannot satisfy the condition of inputs suffering excise duty, they are ineligible for the exemption.Conclusion:The court held that the exemption under Notification No.030/2004 is not applicable to importers as they cannot fulfill the condition of inputs suffering excise duty. Both questions of law were answered against the assessee, and the appeals of the Revenue were allowed.