2023 (7) TMI 360 - AT - Central Excise

Tribunal rules in favor of appellant, finding exemption conditionality, upholding Cenvat credit eligibility, and setting aside personal penalty.

Macleods Pharmaceuticals Ltd Versus C.C.E. & S.T. -Daman And Vinayak Shirodkar Versus C.C.E. & S.T. -Daman

The Tribunal ruled in favor of the appellant, finding that the demand under Rule 6(3) of Cenvat Credit Rules, 2004 was not sustainable due to the ... Recovery of Rebate - Export of exempted goods under Bond / LUT - Export of medicaments - Benefit fo Notification No.42/01-CE(NT) dated 26.06.2001 - demand based on the findings that since the goods exported were fully and unconditionally exempt from duty neither input stage rebate is admissible nor such goods could have been exported under Bond/LUT and hence, they were required to pay presumptive tax of 5% of the value of the exempted goods exported under Rule 6(3) of Cenvat Credit Rule - extended period of limitation - penalty. HELD THAT:- The entire case was made out by the revenue is that since the goods exported are exempted under Notification No. 4/2006-CE it is mandatory for the appellant to avail the exemption and either not to pay the duty nor clear the goods under bond for export, on the pretext that the exemption is unconditional and absolute so appellant was supposed to avail the exemption without any option. From the reading of the notification it can be seen that in both the entry the exemption was granted to not all the goods of the chapter mentioned at column No. 2 of the Table but in case of Sr. No. 54 only to some limited items for which list was appended to the notification, therefore, it cannot be said that the notification is absolute, moreover, in respect to entry Serial No. 59 specific condition is provided as explanation in column No.3 of the table of the notification. Therefore, the notification is not absolute and it is conditional one, therefore it was option for appellant either to avail the exemption under Notification No. 4/2006-CE or not. Accordingly, on this count which is the foundation of the entire case the demand is not sustainable. In catena of judgments, it has been held that even though if on any product duty is not payable for any reason but the assessee paid the duty the Cenvat cannot be denied consequently the provision of Rule 6(3) of Cenvat Credit Rules, 2004 will not be applied. The revenue has interpreted that as per the above condition the appellant was not supposed to clear the goods under Notification No 42/2001-CE(NT) dated 26.02.2001 therefore the clearance of goods cannot be treated as export under bond and consequently the benefit of Rule 6(6)(v) is not available to the appellant. We find that even though there is a condition in Notification No. 42/2001-CE(NT) but the fact in this case is the appellant have cleared the goods under LUT which was accepted by the revenue at the time of export therefore the clearance is clearly covered under Rule 6(6)(v) of Cenvat Credit Rules, 2004. If at all there is any violation it is violation of condition (1)(iv) of Notification No. 42/2001-CE(NT), however the revenue has not made out the case for violation of condition 42/2001-CE(NT) - In this position the allegation of revenue for demand of an amount under Rule 6(3) Cenvat Credit Rules, 2004 cannot be sustained. Extended period of limitation - HELD THAT:- At the time of export, the appellant have been filing application for removal of goods for export in form ARE-1 wherein the tax invoice showing exports under bond was made and the said ARE-1 were signed by Jurisdictional Central Excise authority as well as superintendent of Central Excise with certification of export under LUT-1 under Rule 19 - The appellant’s records were audited by Audit party. In this fact, there is absolutely no suppression of facts on the part of the appellant. Accordingly the demand for extended period is clearly hit by limitation. Penalty of Rs 5,000/- under Rule 15A of Cenvat Credit Rules, 2004 - HELD THAT:- This penalty was imposed consequent to the confirmation of demand against the appellant company. As per above discussion since the demand of amount itself is not sustainable, personal penalty imposed on Shri Vinayak Shirodkar will also not sustain. Accordingly, the penalty is set aside. The demand under Rule 6(3) of Cenvat Credit Rules, 2004 in the impugned order is not sustainable on merit as well as on limitation - Appeal allowed. Issues Involved:1. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 for exports of exempted goods.2. Eligibility of Cenvat credit on inputs used in the manufacture of exempted goods cleared for export.3. Invocation of extended period of limitation for demand.4. Imposition of personal penalty on Shri Vinayak Shirodkar.Summary:1. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004:The core issue was whether the appellant was liable to pay 5% of the value of goods exported under bond/LUT or claim for rebate under Rule 6(3) of Cenvat Credit Rules, 2004, given that the goods were exempt under Notification No. 4/2006-CE. The Tribunal found that the exemption under Notification No. 4/2006-CE was not absolute but conditional, thus allowing the appellant the option to either avail the exemption or clear the goods under bond/LUT. Consequently, the demand based on this premise was deemed unsustainable.2. Eligibility of Cenvat credit on inputs:The Tribunal noted that Rule 6(6)(v) of Cenvat Credit Rules, 2004 exempts goods cleared for export under bond from the provisions of sub-rules (1), (2), (3), and (4). The appellant had cleared the goods under bond/LUT, and the LUT was accepted by the department. Therefore, the export was valid under Rule 6(6)(v), and the demand under Rule 6(3) was not applicable. The Tribunal cited several judgments supporting the position that Cenvat credit cannot be denied for inputs used in the manufacture of goods cleared for export under bond.3. Invocation of extended period of limitation:The demand was raised for the period April 2010 to March 2011 through a show cause notice issued on 02-08-2012, invoking the extended period of limitation. The Tribunal found no suppression of facts or willful misstatement by the appellant, as all records were maintained and audited, and the export procedures were followed with the knowledge of the department. Hence, the invocation of the extended period was deemed incorrect.4. Imposition of personal penalty on Shri Vinayak Shirodkar:The penalty of Rs. 5,000/- imposed on Shri Vinayak Shirodkar under Rule 15A of Cenvat Credit Rules, 2004 was consequential to the confirmation of demand against the appellant company. Since the demand itself was not sustainable, the personal penalty was also set aside.Conclusion:The Tribunal set aside the impugned order, ruling that the demand under Rule 6(3) of Cenvat Credit Rules, 2004 was not sustainable on merits and limitation grounds. The appeal was allowed with consequential relief, and the personal penalty on Shri Vinayak Shirodkar was also annulled.