TaxTMI 
TaxTMI 
2011 (4) TMI 27
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....s used in the manufacture of final products. In the Writ Petition No.8068 of 2010 filed by the assessee seeking implementation of the order of Commissioner (A) dated 14/9/2010, this Court directed the Commissioner to deposit the rebate claim allowed by the Commissioner (A) and accordingly, the Commissioner has deposited in this Court Rs. 38,03,89,634/- towards the rebate claim. 2) Although the Commissioner is aggrieved by the order of the revisional authority in declining to stay the order of the Commissioner (A) till the revision application is heard finally, counsel on both sides urged before us that the matter be heard on merits. Accordingly, counsel on both sides have been heard extensively on the question as to whether on merits the assessee is entitled to claim rebate of duty paid on peppermint oil by adjusting the input credit availed on the inputs used in the manufacture of menthol crystals / peppermint oil. 3) The relevant facts are that the assessee is engaged in the manufacture and export of menthol crystals BP/USP and flavouring materials such as peppermint oil by using menthol (liquid) / dementholised oil as the raw materials. The assessee has its manufacturing u....
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....se duty should not be recovered on the peppermint oil exported by the assessee. The assessee in its reply submitted that since both the final products were exported, the assessee was entitled to utilize the input credit in paying the excise duty on peppermint oil and claim rebate of that duty. The Commissioner of Central Excise, New Delhi by order in original dated 31/8/2009 accepted the contention of the assessee and dropped the proceedings. The said order has been reviewed and appeal has been filed by the revenue against the order dated 31/8/2009 and the same is pending before the CESTAT at New Delhi. 8) The excise authorities in Rajasthan had also issued a show cause notice to reject the rebate claim filed by the assessee on the ground that in the Bhiwadi Unit at Rajasthan, the peppermint oil was subjected to a process to remove the impurities and such a process of removing the impurities does not amount to manufacture and, therefore, no excise duty was payable on clearance of purified peppermint oil and consequently allowing the rebate claim of duty paid on purified peppermint oil does not arise at all. The assessee contended that even if the process of removing the impuriti....
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.... (A). By the impugned order dated 21/1/2011 the Joint Secretary, Government of India rejected the stay application firstly, on the ground that there is no provision for grant of stay in revision proceedings and secondly, since similar rebate claims have already been allowed and paid in the past, it was not a fit case for grant of stay. Challenging the aforesaid order, the present Writ Petition is filed by the Commissioner of Central Excise, Raigad. As noted earlier, the Writ Petition has been heard on merits by consent of the parties on the question as to whether in law the assessee is entitled to claim rebate of duty paid on export of peppermint oil by reversing credit of duty paid on inputs used in the manufacture of exempted menthol crystals and dutiable peppermint oil. 13) Before dealing with the rival contentions, we deem it proper to reproduce herein below some of the rules (to the extent relevant) under the CENVAT Credit Rules, 2004:- "RULE 3. CENVAT Credit - (1) A manufacturer or producer offinal products or a provider of taxable service shall be allowed totake credit (hereinafter referred to as CENVAT credit) of- (i) the duty of excise specified in the....
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.... manufacturer of dutiable and exempted goods and provider of taxable and exempted services - (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of [exempted] goods or for provision of exempted services,] except in the circumstances mentioned in sub-rule (2). [Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.] (2) Where a manufacturer or provider of output service avails CENVAT credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted g....
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....s, consumption and inventory of the inputs as per Rule 6(1) & 6(2) of the CENVAT Credit Rules, 2004 ('2004 Rules' for short), the assessee is not entitled to avail credit of duty paid on inputs used in the manufacture of exempted goods. He submitted that as per Rule 6(6)(v) of 2004 Rules, the assessee is not required to comply with the provisions of sub-rules (1) (2), (3) & (4) of Rule 6 if the excisable goods are cleared for export under bond. In the present case, the assessee has nor cleared the peppermint oil for export under bond and, therefore, the shelter provided under Rule 6(6)(v) is not applicable in the present case and rule 6(1) is attracted in the present case. He submits that the assessee has deliberately paid duty on peppermint oil by debiting the lapsed / unavailable CENVAT credit with malafide intention to claim that amount by way of rebate claim. 15) Mr. Jetly further submitted that once it is established that duty paid inputs are used in the manufacture of final products which are exempted, then the credit of duty paid on inputs is not available and if the credit is already taken, the same has to be reversed or would lapse. In any event, the issue relat....
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....an be claimed by the exporter as rebate of duty under Rule 18 of the Central Excise Rules, 2002. In the present case, the assessee has paid excise duty on the exported peppermint oil by debiting the Cenvat credit availed on menthol used in the manufacture of exempted menthol crystals and dutiable peppermint oil. 21) Basic argument of the revenue is that, where the duty paid inputs are used in the manufacture of final products which are exempted from payment of excise duty, then Cenvat credit on input is not allowable under Rule 6(1) of 2004 Rules. It is contended that where inputs are used in the manufacture of both exempted as well as dutiable final products, then the manufacturer can avail the input credit only on that quantity of input used in the manufacture of dutiable final product provided separate accounts are maintained for receipt, consumption and inventory of input used in the manufacture of final products as provided under Rule 6(2) of 2004 Rules or the manufacturer not opting to maintain separate accounts pays an amount on clearance of the exempted goods at the rate specified under Rule 6(3) of 2004 Rules. In the present case, it is contended by the revenue that the....
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.... used in the manufacture of exempted menthol crystals ? 25) Rule 5 of the 2004 Rules specifically provides that where the exempted final product is cleared without payment of duty under bond, then the credit of duty paid on input used in the manufacture of the exempted final product shall be allowed to be utilised for payment of duty on any final product by way of adjustment of input credit and where for any reasons such adjustment is not possible, then refund of the unutilized input credit would be allowed. 26) In the present case, the assessee on export of exempted menthol crystals has utilized the Cenvat credit availed on inputs used in the manufacture of exempted menthol crystals for paying the excise duty on peppermint oil cleared for export as provided under Rule 5 of 2004 Rules. Thus, in the facts of the present case, since the credit of duty paid on input used in the manufacture of exempted final product is utilized for payment of excise duty on exported peppermint oil, the assessee, instead of getting refund of input credit under Rule 5 of 2004 Rules, is entitled to rebate of duty paid on exported peppermint oil as provided under Rule 18 of the Central Excise Rules, ....