Appellant not liable for duty on exempted goods under Central Excise Act. Rule 6(3) inapplicable. Appeal allowed.

The Tribunal held that the appellant was not liable to pay duty on wholly exempted goods under Section 11D of the Central Excise Act, 1944, as they had paid duty at the relevant time and did not unlawfully retain any collected amount. Additionally, the requirement to pay an amount equal to five percent of the value of such goods under Rule 6(3) of the Cenvat Credit Rules, 2004 was found to be inapplicable as the appellant had opted for a more beneficial concessional rate under a different notification. The impugned order was set aside, and the appeal was allowed.

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Issues:
The issues involved in the judgment are whether the appellant is liable to pay duty on wholly exempted goods under Section 11D of the Central Excise Act, 1944 and whether the appellant is required to pay an amount equal to five percent of the value of such wholly exempted goods under Rule 6(3) of the Cenvat Credit Rules, 2004.

Summary:

Issue 1 - Liability to Pay Duty on Wholly Exempted Goods:
The appellant had cleared certain medicaments on payment of duty despite being wholly exempted under Notification No. 04/2006-CE. The revenue contended that the amount paid by the appellant on exempted goods, collected from buyers as "duty of excise," must be deposited with the Central Government under Section 11D of the Act. The appellant argued that they did not unlawfully retain any collected amount and had paid duty at the relevant time. The Tribunal held that Section 11D applies when an assessee collects duty but does not credit it to the government, which was not the case here. The demand under Section 11D was deemed legally incorrect, and the impugned order confirming the demand was set aside.

Issue 2 - Payment of 5% on Wholly Exempted Goods:
The appellant availed Cenvat Credit on inputs used in manufacturing wholly exempted products and was required to pay an amount equal to five percent of the value of such goods under Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant argued that they chose to pay duty at a concessional rate under Notification No. 2/2011-CE, which was more beneficial. The Tribunal noted that when two notifications prescribe different duty rates, the assessee can opt for the more advantageous one. As the goods were not fully exempted but subject to a reduced rate, Rule 6(3) did not apply. The demand under Rule 6(3) was found inapplicable, and the impugned order was set aside.

Conclusion:
The Tribunal concluded that the demand confirmed by the adjudicating authority was unsustainable in both aspects. Therefore, the impugned order was set aside, and the appeal was allowed with any consequential relief in accordance with the law.

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