2022 (8) TMI 1089 - AT - Central Excise

Tribunal allows appeals, grants CENVAT credit on capital goods under Notification No. 30/2004-CE.

The Tribunal allowed the appeals, setting aside the disallowance of CENVAT credit on capital goods. It concluded that the goods cleared under Notification ... CENVAT Credit - capital goods - clearance of goods both for home consumption as well as for export without payment of duty - exempt goods or not - allegation of the department is that the credit availed on capital goods is not eligible prior to 10.6.2010 for the reason that the appellant has been clearing the goods both for home consumption as well as for export without payment of duty in terms of Notification No.30/2004-CE dated 9.7.2004. HELD THAT:- N/N. 30/2004-CE dated 9.7.2004 exempts payment of duty when the goods are cleared domestically. The Corrigendum issued to the notification makes it clear that the exemption is available even if credit is availed on capital goods. In other words, this notification bars availment of credit on inputs only. Rule 6(4) prohibits the availment of credit on capital goods which are exclusively used for the manufacture of exempted goods. The question then arises whether the availment of benefit of Notification 30/2004 would give rise to a situation that the capital goods are used exclusively for manufacture of exempted goods - It is to be noted that a manufacturer is given an option to avail the benefit of Notification 30/2004. It does not make the goods completely exempted from payment of duty. If the manufacturer avails credit on inputs, then he cannot avail the benefit of the exemption provided under Notification No. 30/2004. Rule 6(4) bars the availment of credit on capital goods which are used exclusively in the manufacture of exempted goods. As per Rule 2(d) of CENVAT Credit Rules, 2004 ‘exempted goods’ means “excisable goods which are exempt from the whole of duty of excise leviable thereon, and includes goods which are chargeable to nil rate of duty”. Thus, the goods cleared under Notification No.30/2004 without payment of duty is optional payment without duty and it cannot be said that these fall within the definition of ‘exempted goods’. Later, the appellant had availed the benefit of Notification No. 29/2004. As per this Notification, the domestic clearances get the benefit of concessional rate of duty. The department has denied the credit availed on capital goods for the period after 10.6.2010 alleging that though the appellant has paid duty on domestic clearance but the capital goods have also been used for manufacture of exported goods. Thus, they have considered the ‘exported goods’ as ‘exempted goods’. This is legally wrong. The definition of exempted goods does not take in goods which are exported. The issue as to whether the benefit of both the notifications can be availed and the credit on capital goods is eligible was considered by the Tribunal in the case of ST. COTTEX EXPORTS (P) LTD. VERSUS COMMISSIONER OF C. EX., LUDHIANA [2010 (1) TMI 1048 - CESTAT NEW DELHI]. The decision of the Tribunal was upheld by the Hon'ble High Court of Punjab and Haryana in COMMISSIONER OF C. EX., CHANDIGARH VERSUS ST. COTTEX EXPORTS PVT. LTD. [2011 (1) TMI 491 - PUNJAB & HARYANA HIGH COURT] whereby the appeal filed by Revenue was rejected - it was held that Under sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004, capital goods Cenvat credit is inadmissible only in respect of those capital goods which are exclusively used in the manufacture of exempted goods - in present case it cannot be said that the capital goods in question had been used exclusively for the manufacture of fully exempted finished products. Jurisdiction - HELD THAT:- The learned AR has submitted that the writ petition filed by the appellant against the order of the Revisionary Authority is pending before the Hon'ble High Court. The said writ petition is against the order of the Revisionary Authority in regard to rebate claims. The Tribunal has no jurisdiction to consider any order passed in regard to rebate claims. However, the jurisdiction for deciding the eligibility of credit as well as application of CENVAT Credit Rules lies within the Tribunal - In the present case, the demand has been issued for recovery of credit wrongly availed on capital goods and is fully within the jurisdiction of this Tribunal. The disallowance of CENVAT credit on capital goods is without legal or factual basis - Appeal allowed. Issues Involved:1. Eligibility of CENVAT credit on capital goods used for manufacturing exempted goods.2. Interpretation of Rule 6(4) of CENVAT Credit Rules, 2004.3. Treatment of exported goods as exempted goods.4. Applicability of Notification No. 30/2004-CE and Notification No. 29/2004-CE.5. Jurisdiction of the Tribunal regarding rebate claims and eligibility of credit.Detailed Analysis:1. Eligibility of CENVAT Credit on Capital Goods:The appellants, manufacturers, and exporters of 100% cotton yarn dyed woven fabrics, availed CENVAT credit on capital goods from 10.6.2010 onwards. The department contended that the credit availed on capital goods received before 10.6.2010 was ineligible since the appellants were enjoying full duty exemption under Notification No. 30/2004-CE. The appellants argued that the notification does not bar availing credit on capital goods, only on inputs, as clarified by a corrigendum issued on the same date as the notification.2. Interpretation of Rule 6(4) of CENVAT Credit Rules, 2004:The department argued that Rule 6(4) prohibits availing credit on capital goods used exclusively for manufacturing exempted goods. The appellants contended that the goods cleared under Notification No. 30/2004 are not considered exempted goods as the notification allows optional payment of duty. The Tribunal in the case of CCE, Madurai Vs. Eastman Spinning Mills P. Ltd. held that Rule 6(4) bars credit on capital goods used exclusively for exempted goods, but Notification No. 30/2004 allows optional duty payment, thus not making the goods entirely exempted.3. Treatment of Exported Goods as Exempted Goods:The department alleged that goods exported should be treated as exempted goods, making the credit availed on capital goods ineligible. The appellants argued that exported goods are not exempted goods under Rule 6(6) of CENVAT Credit Rules, 2004. The Tribunal in India Poly Fibres Ltd. and S.H. Kelkar & Co. Ltd. held that exported goods are not considered exempted goods, and Rule 6(4) does not apply to them.4. Applicability of Notification No. 30/2004-CE and Notification No. 29/2004-CE:The appellants initially availed full duty exemption under Notification No. 30/2004-CE and later availed the benefit of Notification No. 29/2004-CE for concessional duty on domestic clearances. The department's view that the capital goods used for manufacturing exported goods should be treated as exempted was rejected by the Tribunal, stating that exported goods are not exempted goods.5. Jurisdiction of the Tribunal Regarding Rebate Claims and Eligibility of Credit:The department's request to remand the matter to the original authority pending a High Court judgment on a related writ petition was noted. The Tribunal clarified that it has jurisdiction over the eligibility of credit and CENVAT Credit Rules, while rebate claims fall outside its purview. The Tribunal noted that the writ petition was dismissed for non-prosecution, and the appellants were in the process of filing a restoration application.Conclusion:The Tribunal concluded that the disallowance of CENVAT credit on capital goods was without legal or factual basis. The impugned order was set aside, and the appeals were allowed with consequential reliefs. The judgment emphasized that the goods cleared under Notification No. 30/2004-CE are not considered exempted goods and that exported goods do not fall under the definition of exempted goods, thus allowing the credit availed on capital goods.