Exemption notification 04/2006-CE is conditional, assessee can choose more beneficial provision over mandatory 5% payment under Rule 6(6)(iv)

CESTAT Ahmedabad held that exemption notification No. 04/2006-CE is conditional, not absolute, giving the assessee the option to avail it or not. The appellant cleared goods under notification No. 108/1995-CE and was not mandatorily required to use the 2006 notification. Under Rule 6(6)(iv) of Cenvat Credit Rules, 2004, the appellant was eligible for Cenvat credit without paying 5% as demanded by the department. The tribunal emphasized that when two beneficial provisions are available, the assessee can choose the more beneficial one. The demand for 5% payment was unsustainable, and the appeal was allowed.

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Issues Involved:
1. Whether Notification No. 04/2006-CE is absolute or conditional.
2. Whether the appellant is mandatorily required to avail Notification No. 04/2006-CE.
3. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004.
4. Time-barred nature of the demand.
5. Personal penalty on Shri Vinayak Shirodkar.

Summary:

Issue 1: Whether Notification No. 04/2006-CE is absolute or conditional.
The Tribunal examined whether Notification No. 04/2006-CE (Sr. No. 54 and 59) is conditional. It was held that the notification is conditional, as it does not grant exemption to all goods in the chapter but only to specific items listed. Therefore, it is optional for the appellant to avail the exemption under Notification No. 04/2006-CE.

Issue 2: Whether the appellant is mandatorily required to avail Notification No. 04/2006-CE.
The Tribunal found that since Notification No. 04/2006-CE is conditional, the appellant was not mandatorily required to avail it. The department's insistence on the mandatory availing of this notification to demand 5% under Rule 6(3) of Cenvat Credit Rules, 2004 was deemed unsustainable.

Issue 3: Applicability of Rule 6(3) of Cenvat Credit Rules, 2004.
The Tribunal concluded that Rule 6(3) of Cenvat Credit Rules, 2004 applies only if inputs are used in both dutiable and exempted goods. Since the appellant did not avail the exemption under Notification No. 04/2006-CE and paid excise duty on goods cleared for export, the demand under Rule 6(3) was not applicable. Furthermore, the Tribunal referenced several judgments supporting the view that Cenvat credit cannot be denied on inputs used in exported goods, even if the final products are exempt.

Issue 4: Time-barred nature of the demand.
The Tribunal noted that the show cause notice was issued beyond the normal period of limitation, invoking the extended period. Given that the appellant maintained proper records and there was no suppression of facts, the demand was found to be time-barred. The Tribunal cited several judgments to support this conclusion.

Issue 5: Personal penalty on Shri Vinayak Shirodkar.
Since the demand against the appellant company was not sustainable, the personal penalty imposed on Shri Vinayak Shirodkar under Rule 15A of Cenvat Credit Rules, 2004 was also set aside.

Conclusion:
The Tribunal held that the demand of 5% under Rule 6(3) of Cenvat Credit Rules, 2004 was not sustainable on both merit and limitation grounds. The impugned order was set aside, and the appeals were allowed. The Tribunal emphasized that when two beneficial exemptions are available, the more beneficial one should be allowed to the assessee.

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