2019 (1) TMI 1223 - AT - Central Excise

CESTAT ruling favors biscuit manufacturers on CENVAT credit for export clearances

Ravi Foods Pvt Ltd, Disha Foods Pvt Ltd Versus Commissioner of Customs, Central Excise and Service Tax Hyderabad-IV

The Appellate Tribunal CESTAT HYDERABAD ruled in favor of the appellants, biscuit manufacturers, regarding the valuation under Section 4A of the Central ... CENVAT Credit - Scope of SCN - manufacturing of exempted goods as well as dutiable goods - Rule 6 (1), (2) and (3) of the CENVAT Credit Rules 2004 - denial on the ground that the biscuits which were cleared for export are exempted if they are cleared locally - Scope of SCN - Held that:- The impugned order has traversed beyond the allegations in the show-cause notice, wherein the adjudicating authority was directed for further consequential action under Rule 5 of CENVAT Credit Rules 2004. This part of the order of the adjudicating authority is clearly beyond the scope of the show-cause notice as these were the reasons given for seeking rejection of refund claims. The provisions of Rule 3 (4), will apply in favour of the appellant which discusses about the eligibility to avail CENVAT credit on capital goods if they are used for manufacturing of dutiable as well as exempted goods - Appeal disposed off. Issues: Valuation under Section 4A of Central Excise Act, CENVAT credit reversal on inputs, input services, and capital goods, applicability of Rule 6 of CENVAT Credit Rules, denial of CENVAT credit on capital goods, jurisdictional Assistant/Deputy Commissioner's role under Rule 5 of CCR 2004.The judgment by the Appellate Tribunal CESTAT HYDERABAD dealt with three appeals raising the same question of law regarding valuation under Section 4A of the Central Excise Act 1944. The appellants, manufacturers of biscuits, availed exemption under Notification No. 3/2007 for biscuits with specific MRPs in the domestic market but valued goods for export under Section 4, claiming rebate. The issue arose when the authorities demanded reversal of CENVAT credit on inputs, input services, and capital goods, as the goods were considered exempted. The adjudicating authority allowed CENVAT credit on inputs and input services but denied it on capital goods. The appellate tribunal found that export clearances were not covered by Rule 6 of the CENVAT Credit Rules 2004, upholding the appellant's contentions. However, the tribunal noted that the adjudicating authority's order went beyond the show-cause notice by directing further action under Rule 5 of CCR 2004, which was expunged. The tribunal emphasized that the appellant used capital goods for both dutiable and exempted goods, making them eligible for CENVAT credit under Rule 3 (4). Thus, the paragraph denying CENVAT credit on capital goods was expunged.The judgment highlighted the importance of adherence to the scope of show-cause notices and the correct application of relevant CENVAT credit rules. It clarified that export clearances are distinct from local clearances concerning CENVAT credit eligibility. The tribunal emphasized the eligibility of CENVAT credit on capital goods used for both dutiable and exempted goods, ensuring fair treatment for manufacturers engaged in both types of production. The decision underscored the need for authorities to follow due process and uphold the principles of natural justice while adjudicating on CENVAT credit matters. Ultimately, the tribunal's ruling aimed to strike a balance between revenue protection and facilitating legitimate business operations within the framework of excise laws.