2009 (2) TMI 190 - AT - Central Excise

Tribunal finds in favor of appellants, stresses adherence to notification conditions, highlights procedural lapses.

TTP TECHNOLOGIES PVT. LTD. Versus COMMISSIONER OF C. EX., BANGALORE-II

The Tribunal ruled in favor of the appellants, finding no violation of Notification No. 40/2006-Cus. The judgment emphasized adherence to specific ... Cenvat Credit – benefit of rebate under notification 19/2004 versus export obligation under DFIA scheme – recover of rebate / refund allowed earlier - Revenue initiated proceedings against the appellants on the ground that rebate sanctioned was erroneous. The Adjudicating Authority gave a finding that the condition of the Notification No. 40/2006-Cus., dated 1-5-2006 was violated because the appellants took Cenvat credit on inputs used in exported goods – held that - Revenue initiated proceedings against the appellants on the ground that rebate sanctioned was erroneous. The Adjudicating Authority gave a finding that the condition of the Notification No. 40/2006-Cus., dated 1-5-2006 was violated because the appellants took Cenvat credit on inputs used in exported goods - In view of this, the said Notification has been violated – recovery set aside. Issues:Violation of Notification No. 40/2006-Cus regarding Cenvat credit and rebate of duty on exported goods.Detailed Analysis:Issue 1: Violation of Notification No. 40/2006-CusThe appeals were filed against Orders-in-Original passed by the Commissioner of Central Excise, Bangalore-II Commissionerate. The appellants obtained inputs, took Cenvat credit, manufactured final products, and exported them under the Duty Free Import Authorization Scheme (DFIA). The rebate of duty was claimed under Rule 18 of the Central Excise Rules, 2002, and was sanctioned under Notification No. 19/2004-C.E. The Revenue initiated proceedings alleging that the rebate sanctioned was erroneous as the condition of Notification No. 40/2006-Cus was violated by taking Cenvat credit on inputs used in exported goods. The Adjudicating Authority found that the appellants violated the notification by taking Cenvat credit on inputs used in exported goods.Issue 2: Arguments and ClarificationsThe learned Advocate argued that the appellants did not import any inputs under DFIA Scrips, so there was no question of taking credit for such inputs. They contended that using Cenvat inputs for DFIA exports was not prohibited under any relevant schemes or notifications. The learned JCDR referred to the Foreign Trade Policy and argued against the availability of Cenvat credit for inputs procured against the Authorization. However, the appellants clarified that the indigenous inputs were not procured against the authorization but in the normal course of business.Issue 3: Examination of Notifications and Scheme ProvisionsThe Tribunal carefully examined the provisions of the DFIA Scheme, the Foreign Trade Policy, and Notification No. 40/2006-Cus. It was noted that the scheme allows duty-free import of inputs for export products. The relevant notification prohibits claiming rebate on inputs procured against authorization, which the appellants did not do. The Tribunal found no violation of the notification as the inputs were obtained in the normal course, not against the authorization. Additionally, it was highlighted that any erroneous refund could only be recovered after issuing a Show Cause Notice, which was not done in this case. As no review under Section 35E had been conducted, the impugned orders were set aside, and the appeals were allowed.In conclusion, the Tribunal ruled in favor of the appellants, finding no violation of Notification No. 40/2006-Cus and highlighting procedural shortcomings in the Revenue's actions. The judgment emphasized the importance of adhering to the specific conditions and provisions of relevant notifications and schemes while also underscoring the necessity of following due process in cases of erroneous refunds.