TaxTMI 
TaxTMI 
2014 (12) TMI 952
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....ha Oil (DFMO) (sub-heading 33019059) and Mentha Piperita Oil (MPO) (sub-heading 3301240). These inputs were being received from manufacturers in Jammu availing of exemption under Notification NO. 56/02-CE. In respect of the above-mentioned inputs being received by them, they were availing Cenvat credit of the duty paid on them in terms of the provisions of Rule 12 of the Cenvat Credit Rules, 2004. Among the final products, while during the period prior to 01/03/08, all the final products were dutiable, w.e.f. 01/03/08 by Notification No. 4/08-CE dated 01/03/08 issued under Section 5A(i)of the Central Excise Act, 1944, the Menthol Crystals BP/USP and Menthol BP/USP falling under Chapter heading 30039021 became fully and unconditionally exempt from Central Excise duty. The remaining final products Mentha Piperita Oil, Menthol (liquid), Rectified Spearmint Oil, Menthon etc. remained dutiable. The dispute in this case is for the period from 1st March 2008 to May 2009. As on 01/03/08, when the Menthol Crystals BP/USP and Menthol BP/USP became fully exempt from duty, there was some opening balance of the Cenvat credit, which according to the Department, in terms of the provisions o....
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....gment of Hon'ble Delhi High Court in the case of CCE, Delhi - I vs. Punjab Stainless Steel reported in 2009 (234) E.L.T. 605 (Del.) dropped the proceedings initiated against the respondent by the three show cause notices mentioned above. The Commissioner in this order held that the provisions of Rule 6 (6) (V) of the Cenvat Credit Rules, 2004 are applicable to this case as the Menthol Crystals BP/USP and Menthol BP/USP, though fully and unconditionally exempt from duty w.e.f. 01/03/08, had been exported out of India and that in respect of the credit balance as on 01/03/08 the provisions of Rule 11 (3) of the Cenvat Credit Rules, 2004 would not be applicable. 1.3 This order of the Commissioner was examined by the Committee of Chief Commissioners for examining its legality and propriety and the Committee exercising powers under Section 35E (1) of the Central Excise Act, 1944 issued a review order No. 69/09 dated 20th November 2009 directing the Commissioner to file an application before the Tribunal under Section 35E (4) of the Central Excise Act, 1944 for correct determination of the points arising of the adjudication order as mentioned in the review order. In pursuance of this o....
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....duty paid in cash by them is refunded to them in full. The manufacturing unit of the respondent in Delhi take Cenvat credit in respect of the duty paid material received from the above-mentioned four Jammu units in terms of the provisions of Rule 12 of the Cenvat Credit Rules, 2004. Menthol Crystals BP/USP and Menthol BP/USP became fully exempt from duty w.e.f. 01/03/08 in terms of exemption Notification No. 4/08-CE dated 01/03/08. When these final products became fully and unconditionally exempt from duty, there was no question of their export under bond. Therefore, firstly, in terms of the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 the respondent were required to reverse the Cenvat credit involved on the cenvated inputs lying in stock, cenvated inputs in process and cenvated inputs contained in finished product lying in stock as on 01/3/08 and the balance amount of Cenvat credit, if any left, would lapse, and secondly, they could not avail any Cenvat credit in respect of fresh receipt of inputs during period w.e.f. 01/03/08. Even if the final product Menthol Crystals BP/USP and Menthol BP/USP had been exported out of India, the provisions of Rule 6 (6) (V) of th....
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....e Act, 1944 which states that for the removal of doubt it is hereby declared that where an exemption under sub-Section (1) of Section 5A in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted unconditionally, the manufacturer of such excisable goods shall not pay duty of excise on such goods. The above sub-Section has been inserted in the statute w.e.f. 13/05/05 and was in force during the period of dispute. In view of such clear statutory provisions, the question of furnishing bond or letter of undertaking so as to safeguard duty in respect of goods exported would be an empty and futile formality. A harmonious construction of Section 5A (1A) of Central Excise Act, 1944 with Rule 6 (6) of the Cenvat Credit Rules, 2004 would be that the term 'excisable goods' in this sub-rule should be read as 'dutiable goods'. The above statutory provisions were not brought to the notice of Hon'ble Bombay High Court in the cases of Repro India Ltd. vs. Union of India decided vide judgment reported in 2009 (235) E.L.T. 614 (Bom.) and the respondent's own case decided vide 2011 (270) E.L.T. 212 (Bom.). In the given context of Rule 6 (6) (V) of Cenvat ....
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....Authority has erred in ignoring and over looking the proviso to Rule 5 of the Cenvat Credit Rules, 2004 which provides that no refund shall be allowed if the manufacturer interalia claims rebate in respect of such duty. In the instant case, no segregation of duty paid on inputs was made in reference to the final products and the refund and rebate were claimed from a common basket of input credit. To be precise, all the inputs, barring DFPO and DFSO, were admittedly processed to manufacture Menthol USP/BP and Menthol Crystals USP/BP in the first instance and only the residual materials were further processed with additional inputs such as DFPO and DFSO to manufacture flavouring materials. Since Menthol BP/USP and Menthol Crystals BP/USP were fully exempt from duty w.e.f. 01/03/08, no Cenvat credit was admissible in respect of inputs used in their manufacture and, therefore, utilization of such Cenvat credit for payment of duty on dutiable final products was not permissible. In any case, since part of Cenvat credit in respect of inputs for Menthol Crystals/Menthol USP/BP has been used for payment of duty on flavouring agents exported under rebate claim, Rule 5 refund of that Cenvat c....
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....vailed in respect of such inputs or capital goods shall be payable under the cover of invoices. (ix) It was open to the respondent to claim rebate of duty of the un-utilised input credit under Rule 18 of the Central Excise Rules readwith Notification No. 21/04-CE (NT) instead of seeking refund under Rule 5 of the Cenvat Credit Rules. It is inexplicable as to why the respondent avoided such obvious legitimate course for tax neutralization in respect of their exempted products which were exported. (x) In the facts and circumstances of this case, the judgment of Hon'ble Bombay High Court in the case of Repro India Ltd. (supra) is not applicable. The issue involved in the case of Repro India Ltd. (supra) was whether the assessee, manufacturing both dutiable packaged software and dutiable stationery books, and non-dutiable printed books was entitled to export non-dutiable printed books under letter of undertaking so as to obtain cash refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. While the above issue is common with the issue in one of the cases in hand, the issue pertaining to the demand of Rs. 77.35 crores based on the provisions of Rule 11 (3) of C....
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....2004 as the respondent were not in a position to utilize the credit for payment of duty on clearance for home consumption or for export. Another point of dispute is as to whether in terms of Rule 11 (3) of Cenvat Credit Rules, 2004, Cenvat credit balance in the respondent's Cenvat credit account as on 01/03/08 is to be reversed just because out of several final products being manufactured by them, two final products - Menthol Crystals BP/USP and Menthol BP/USP became fully exempt w.e.f. 01/03/08 even though other final products remained dutiable. The first issue stands decided in favour of the respondent by judgment of Hon'ble Bombay High Court in case of Repro India Ltd. vs. Union of India reported in 2009 (235) E.L.T. 614 (Bom.), by Hon'ble Himachal Pradesh High Court in the case of CCE vs. Drish Shoes Ltd. reported in 2010 (254) E.L.T. 417 (H.P.) and also by Hon'ble Delhi High Court in the case of CCE, Delhi - I vs. Punjab Stainless Steel reported in 2009 (234) E.L.T. 605 (Del.). Hon'ble Bombay High Court in the case of Repro India Ltd. (supra) has held that when inputs are used in manufacture of dutiable as well as exempted final products and the exempted final products are exp....
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....elex Impex Ltd. reported in 2009 (245) E.L.T. 45 (Del.). (iv) It was candidly acknowledged by the learned Special Counsel for the Revenue during hearing that were the Revenue to succeed in the present appeal, it could recover back from the respondent the amount which had been paid to it consequent to the directions of Hon'ble Bombay High Court. This single submission is sufficient to dismiss the entire case of the Revenue as the Revenue obviously cannot be permitted to pray before this Tribunal for an order, which would nullify the relief granted by the Hon'ble Bombay High Court specially after having failed in its challenge against the said judgment before Hon'ble Supreme Court as well. (v) Rule 11 (3) (ii) of Cenvat Credit Rules, 2004 does not apply when a manufacturer manufacturers dutiable as well as exempted final products out of common Cenvat credit availed inputs. This issue was specifically urged as ground (xv) in the SLP preferred before the Apex Court against judgment dated 06/04/11 of Hon'ble Bombay High Court, but still the judgment of Hon'ble Bombay High Court was affirmed by the Apex Court vide order dated 04/04/12. (vi) As regards the allegation that t....
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....s used in the manufacture of exempted goods except in these circumstances mentioned in sub-Rule (2). In terms of sub-Rule (2) of Rule 6 ibid, when a manufacturer avails of Cenvat credit in respect of any input or input services and manufactures such final products which are chargeable to duty as well as the exempted goods, then the manufacturer shall either maintain separate account and inventory for the receipt, consumption of the inputs/input services meant for use in the manufacture of dutiable final product and exempted final product and take Cenvat credit only in respect of inputs/input services used in or in relation to manufacture of dutiable final product, or if does not maintain such account and inventory, in accordance with the provisions of sub-Rule (3) of Rule 6, he shall pay an amount either equal to 10%/5% of the sale price of the exempted final product or equal to the Cenvat credit involved on the inputs/input services used in or in relation to manufacture of exempted final products, to be calculated as per the provisions of this sub-Rule. 6.2 In accordance with the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004, a manufacturer or producer of the final pro....
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....e provisions of Rule 6 (1), 6 (2), 6 (3) of Cenvat Credit Rules, 2004 would not be applicable in view of the provisions of Rule 6 (6) (v) of the Cenvat Credit Rules, 2004 and in this regard the respondent rely upon judgments of Hon'ble Bombay High Court in the case of Repro India Ltd. vs. Union of India (supra), Union of India vs. Sharp Menthol India Ltd. (supra) and also the judgment of Hon'ble Delhi High Court in the case of CCE, Delhi - I vs. Punjab Stainless Steel (supra). Besides this, it is also pleaded that the provisions of Rule 11 (3) (ii) of Cenvat Credit Rules, 2004 are not applicable to this case, as during period w.e.f. 01/03/08, the respondent, besides the exempted final products, had continued to manufacture the dutiable final products also. The Revenue's appeal No. E/3191/09-EX is against the order-in-original No. 20-22/D-I/09 dated 31/08/09 dropping the proceedings initiated by issue of three show cause notices for demand of allegedly wrongly availed Cenvat credit of Rs. 14,04,09,663/- (opening balance of Cenvat credit as on 01/03/08) Rs. 27,43,50,554/- [Cenvat credit availed during March 2008 to July 2008], Rs. 24,74,15,042/- [Cenvat credit availed during July 200....
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....nbsp; 11 (3) : A manufacturer or producer of a final product shall be required to pay an amount equivalent to the Cenvat credit, if any taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, - (i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under Section 5A of the Act; or (ii) The said final product has been exempted absolutely under Section 5A of the Act, and after deducting the said amount from the balance of Cenvat credit, if any, lying in this credit, the balance, if any still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported. 8.1.1 From a plain reading of the above sub-Rule, it is clear that this rule applies, if - (a) one or more duty paid inputs in respect of which Cenvat credit has been taken, have been used in or....
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....nvat Credit Rules, 2004, Cenvat credit can be utilized for payment of excise duty on any final product and Section 11 (3) cannot be given an interpretation which is in conflict with the provisions of Rule 3 (4). Therefore, on this point, we agree with the finding of the learned Commissioner that Rule 11 (3) does not apply to this case. 8.2 As regards the second issue, the provisions of sub-rule (1) of Rule 6 of the Cenvat credit Rule, 2004 are subject to the provision of sub-rule (6) of this rule and in the circumstances enumerated in various clauses of Rule 6(6), the provisions of sub-rule (1), (2) and (3) of Rule 6 are not applicable. The thrust of the Revenues case is that the word 'excisable goods' in sub-Rule (6) of Rule 6 of the Cenvat Credit Rules, 2002 should be read as 'dutiable goods' and accordingly, the provisions of this sub-rule would not be applicable to the fully exempted finished products which have been exported out of India, and the Cenvat credit in respect of the same would not be admissible in accordance with the provisions of sub-Rule (1) of Rule 6. In other words, the contention of the Revenue is that when some finished products which are fully exem....
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....High Court. Hon'ble Bombay High Court in this case, after analyzing the provisions of sub-Rule (6) of Rule 6 of the Cenvat Credit Rules, 2004 and also the provisions of Rule 19 of the Central Excise Rules, 2002, held that the term 'excisable goods' in Rule 6 (6) of the Cenvat Credit Rules, 2004 is vide enough to include both dutiable as well as exempted goods and that the Cenvat credit in respect of inputs used in the manufacture of fully and exempt goods which had been exported under bond/letter of undertaking would be admissible and, as such, the provisions of Rule 6 (6) (v) of the Cenvat Credit Rules, 2004 would be applicable. Hon'ble High Court in this case also held that the bar provided under Rule 6 (1) and the liability created under Rule 6 (3) (b) readwith Rule 6 (2) of the Cenvat Credit Rules, 2004 would not be attracted, when the finished goods even if fully exempt from duty, are exported out of India and this bar would be applicable only if the assessee does not export the exempted goods. Accordingly, Hon'ble Bombay High Court held that in respect of clearances for export of the printed books which were fully exempt from duty, the provisions of Rule 6 (2) readwith ....
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.... the case of Repro India Ltd. vs. Union of India (supra). SLP filed by the Government to the Apex court against this judgment of the Bombay High Court had been dismissed vide judgment dated 04/04/2012. In view of judgments of three High Courts on the issue involved one of which has been affirmed by the Apex Court, the Revenue's plea that in Rule 6 (6) (v), the words 'excisable goods' should be interpreted as 'dutiable goods' cannot be accepted. 8.2.2 In this regard another plea of the Revenue is that by Notification No. 24/10-CE (NT) dated 26/05/10 the Notification No. 42/01-CE (NT) dated 26/06/01 was amended and as per the amended notification, the export of excisable goods which are chargeable to nil rate of duty or are wholly exempt from duty, other than goods cleared by 100% EOU, are not be allowed under the Notification No. 42/01-CE (NT) and that this amendment has to be treated as of clarificatory nature and therefore, a retrospective amendment. We do not accept this plea Notification No. 42/01-CE (NT) dated 26/06/01 issued under Rule 19 (3) of the Central Excise Rules, 2002 prescribes the conditions to be observed and the procedure to be followed for the purpose of ....
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....n the basis of the invoices issued by the above-mentioned four Jammu units. 10.1 However, it is seen that in none of the present show cause notices, which are the subject matter of present appeals, either this allegation has been made or any evidence in this regard has been discussed. In the three show cause notices which culminated in the order-in-original No. 20-22/D-I/2009 dated 31/03/09 passed by the Commissioner, there is not even a whisper of this allegation. Even in the written submissions wherein this plea has been made, no evidence in support of this allegation has been disclosed. In any case, such an evidence is yet to be evaluated, as the show cause notices issued to M/s Ambika International, M/s Fine Aromatics, M/s Jay Ambey Aromatics and M/s Shiva Mint Industries and also to the respondent have not been adjudicated. As held by the Apex court in the case of CCE, Nagpur vs. Ballarpur Industries Ltd. reported in 2007 (215) E.L.T. 489 (S.C.), show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if a particular Rule has not been invoked in the show cause notice, it would not be open to the Commissioner to invoke that Ru....