TaxTMI 
TaxTMI 
2026 (6) TMI 1356
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....y seven thousand eight hundred thirty nine rupees) against M/s Shree Ambaji Fibres (Private) Limited in terms of section 11A(10) of the Central Excise Act, 1944 and the cenvat credit of Rs.1.80.22.963/- availed and reversed is appropriated against the determined duty liability: (iii) determine charge and recovery of interest, on the duty amount determined at (ii) above, in terms of section 11AA of the Central Excise Act, 1944; and (iv) impose penalty of Rs.3,75,47,839/- (three crore seventy five lakh forty seven thousand eight hundred thirty nine rupees), i.e. equal to duty liability determined at (ii) above, on M/s Shree Ambaji Fibres (Private) Limited in terms of section 11AC(1)(c) of the Central Excise Act, 1944 and the benefit of reduced penalty shall be applicable subject to fulfilment of attendant conditions in terms of section 11AC (1) of the Central Excise Act, 1944. The support of provisions of section 174 of the Central Goods & Services Act, 2017 is duly invoked and applied in this order. 8. This order is issued without prejudice to any other action that may be taken against the noticee under the Central Excise Act, 1944 and the rules f....
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....cause as to why: (i) the benefit of Notification No. 30/2004-CE dated 9.7.2004 on the clearances of synthetic filament yarn and its waste falling under chapter sub-heading No. 5402 during the period May, 2016 to June, 2017 should not be denied to them (ii) the total central excise duty amounting to Rs. 3,75,47,839/- (Rupees three crore seventy five lakh forty-seven thousand eight hundred and thirty-nine only) should not be demanded and recovered from them under Section 11A(4) of the Central Excise Act, 1944. (iii) amount of Rs. 1,80,22,963/- @ 6% already reversed by the assessee under Rule 6(3) of cenvat credit rules, 2004 should not be declared invalid (iv) interest at an applicable rate on the amount as shown in (ii) above, should not be demanded and recovered from them under Section 11AA of the Central Excise Act, 1944. (v) penalty should not be imposed upon them under the provisions of Rule 25 of Central Excise Rules, 2002 read with Section 11AC (1) (c) of the Central Excise Act, 1944. 2.7 The show cause notice has been adjudicated as per the impugned order referred in para 1 above. Aggrieved appellant have filed this appeal. 3....
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....M/s SAFPL was entitled to enjoy the benefit of exemption from excise duty in terms of Notification No.30/2004-CE in the face of availment of cenvat credit in respect of inputs used in the manufacture of such goods. The relevant portions of Notification No.30/2004-CE are extracted below,- "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 7/2003-Central Excise dated the 1st March 2003, published in the Gazette of India vide number G.S.R. 137(E), dated 1st March 2003, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in column (3) of the Table below and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act). specified in the corr....
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....l products and a provider of output service.- (1) The CENVAT credit shall not be allowed on such quantity of input which used in or in relation to the manufacture of exempted goods or for provision of exempted services, ..... (2) Where a manufacturer or provider of output service avails of 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 ............. (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or provider of output service, opting not to maintain separate accounts, shall follow any one of the owing options, as applicable to him, namely:- (i) pay an amount equal to six per cent of value of the exempted goes and exempted services: or ...... The Noticee has undisputedly cleared goods without payment of duty in terms of Notification No.30/2004-CE and then ex post facto availed cenvat credit in respect of the inputs that were used for manufacture of....
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....he consequences are denial of benefits under the Notification. For availing benefits under an exemption Notification, the conditions have to be strictly complied with. Therefore, CEGAT endorsed the view that the exemption from operation of Rule 174, was not available to the appellants. On the facts found, the view is on terra firma. We find no merit in this appeal, which is, accordingly, dismissed." In the matter of CCE Mumbai-I Vs Bombay Dyeing Mfg Co. Ltd, reported in 2007 (215) ELT 3, the Apex Court again dealt with the issue of compliance with conditions prescribed in an exemption notification and held as under,- "5. The assessee herein opted for exemption under Notification No. 14/2002 under which grey fabrics, not subjected to any process, were chargeable to nil rate of duty subject to the condition that the said fabrics were made from textile yarn on which appropriate duty of excise stood paid and no credit for duty paid on inputs had been taken under CENVAT Credit Rules, 2002. ............... 7 ..........In the present case, before the account could be debited and before the assessee could avail of CENVAT credit, the assessee has reversed CENVAT c....
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.... fact that duty was not paid at the time of clearance of the inputs being clearly established as also the fact that one of the inputs used in the manufacture of the final product so having been cleared would certainly amount to non-compliance of the condition No. 4 of the notification. The time factor of the payment of duty cannot be said to be a mere technical matter. Condition No. 4 clearly refers to lawful clearance of duty on the inputs. 11. The decision in the matter of Ambay Cements also lend support to the contention made on behalf of the respondents. In Bombay Dyeing & Mfg. Co. Ltd. case the Apex Court had clearly held that "when we come to the Exemption Notification No. 14/2002C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming the exemption. Question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made....
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....s have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave - (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption." 5. The law is very well settled on mandatory co....
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....enario, if the noticee retains benefit of cenvat credit then the benefit of exemption becomes wrongful and invalid. The noticee has canvassed elaborate defence but that lacks support, logic and rationale. The case law relied upon by the defence do not apply to the peculiar facts and circumstances of the case in hand. It is well settled legal proposition that an exemption notification has to be strictly construed and an express condition barring availment of cenvat credit cannot be wished away as such an attempt would be in the nature of reading what is not there in the statute. The attempted interpretation of the notification and the Credit Rules lacks legal support and encourages unjust enrichment through a process of subsidy which is not envisaged in the law. The noticee has failed to demonstrate the legal provisions that would allow availment of cenvat credit when expressly barred in exemption notification or availment of exemption from duty in the face of express violation of the condition prescribed for such exemption. The defence seeks to turn an express condition not only otiose but takes it to a different level where partial reversal of cenvat credit is sought to be present....
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....dit of Rs. 2,88,96,674/- on inputs used in exempted goods, reversed credit amount of Rs. 1,80,22,963/- and retained the balance amount of Rs. 1,08,73,711/- as specified in para 11 of the show cause notice. The given special & unique facts determine the question of limitation in the case in hand. It is undisputed that impugned cenvat credit was availed in May 2017 which led to the cause of raising the instant demand and the demand has been raised on 26.04.2019 i.e. within the normal period of limitation of two years. The acts of suppression are clearly alleged in the show cause notice. The show cause noticee seeks to invoke penal provisions of section 11AC(1)(c) of the Central Excise Act, 1944 i.e. duty not paid on account of "reason of fraud or collusion or any willful mis-statement or suppression of facts, contravention of any provisions ..... with intent to evade payment of duty". The noticee has set up elaborate defence by claiming that it's an issue of interpretation. The claim appears to be attractive prima facie. The established facts demonstrate that goods were cleared without payment of duty and cenvat credit was also not availed and only post clearance, the noticee dev....
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....nstrate the same we reproduce the letter dated 29.03.2017 as such wherein appellant was directed to reverse the credit @ 6% in respect of the exempted goods cleared in terms of the notification No 30/2004-CE.   This letter was subsequently followed by a show cause notice dated 22.05.2017 stating as follows after referring to the above letter: "9. Whereas, the Jurisdictional Range Officer vide his letter F.No. R-1/Misc/Scrutiny-ER-1/Ambaji/2016-17 dated 29.03.2017, informed the assessee regarding amendment made in Rule 6(1), 6(2) & 6(3) of the Cenvat Credit Rules, 2004, w.e.f. 01.04.2016 and requested the assessee to pay the amount equal to six percent of value of the exempted goods cleared during the period from April-2016 to March-2017, in terms of Rule 6(3)(i) of the CCR, 2004. However, no response has been received from their side till date. 10. And whereas, as per ER-1 returns filed by the assessee, it has been noticed that they have cleared the product "Synthetic Filament Yarn" total valued at Rs. 17,51,35,780/- (details as per Annexure "A" attached) under exemption notification 30/2004-CE(NT) dated 09.07.2004 during the period from April-2016 to Marc....
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....etic Filament Yarn & Ita Waste cleared under exemption during the period from April-2016 to March-2017 i.e.. Ra. 1,05,17,213/, subject to a maximum of the sum total of opening balance of Cenvat Credit as on 01.04.2016 & Cenvat credit availed during 2016-17 i.e. Rs. 17,32,402/-, as provided in Rule 6(3)(i) of CCR, 2004, alongwith interest. Therefore, it appears that an amount of Rs.17,32,402/- is liable to be recovered from them under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11A(1) of Central Excise Act, 1944, along with applicable interest on the said amount, under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11AA of the Central Excise Act, 1944. Further, the act of contravention of provisions of Cenvat Credit Rules, 2004, as amended w.e.i. 01.04.2016, an discussed above, appears to constitute an offence of the described under Rule 15(1) of the CCR 2004 and thus it appears that the assessee by such act of contravention render themselves liable for penal action as provided under Rule 15(1) of the CENVAT Credit Rules, 2004 in terms of clause (a) or clause [b] of sub-section (1) of Section 11AC of the Central Excise Act, 1944 nature 12. Now, ....
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....ng the exemption under this Notification as per the condition prescribed by the Notification appellant was not taking any CENVAT Credit of the input duty paid by them. They were simultaneously clearing similar/ identical goods on payment of duty as per the tariff rate, and were also availing CENVAT Credit in respect of the said goods cleared without claiming the exemption. The appellant maintained separate account in respect of the goods cleared under exemption and without availing the exemption. Revenue objected, and by referring to Rule 6 of CENVAT Credit directed the appellant to reverse the CENVAT Credit @ 6% on the goods cleared without availing the exemption. As appellant had not taken any credit in respect of the said goods cleared under exemption, they took the credit due in respect of these goods and reversed the same @ 6% as directed by revenue. Contrary to their own directions revenue initiated these proceedings to demand the Central Excise Duty due on the said goods cleared claiming exemption under Notification No 30/2004-CE stating that cenvat credit was taken in contravention of conditions of exemption notification. 4.6 The issue involved in the present case is no ....
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....nder:- "Payment of an amount under sub-Rule (3) shall be deemed to be Cenvat credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no Cenvat credit of inputs and input services shall be taken." 5. From the plain reading of the above provision, it is observed that the provision of sub Rule (3D) was specifically provided under the statute to meet with the situation as existing in the present case. The appellant have reversed or paid the amount in terms of sub Rule (3) of Rule 6, therefore, as per sub Rule (3D), it will amount to not taking of Cenvat credit and when this be so, the condition of Notification No. 30/2004-CE stands complied. 6. The very same issue has been considered by this Tribunal in the case of Spentex Industries Limited (supra) wherein the following order was passed:- "5. The short point for decision is the eligibility of the appellant for exemption under Notification No. 30/2004-C.E. when they have reversed 6% of the value of exempted goods in terms of Rule 6(3)(i). We find the appellants claim on the applicability of sub-rule (3D) of Rule 6 is legally sustainable. The said su....
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....es and perusal of record, we find that the benefit of exemption Notification No. 30/14-CE was denied, on the ground that the appellant have availed the Cenvat Credit on receipt of the common inputs. However, the facts is not under dispute that the appellant though availed the Cenvat Credit initially but at the time of clearance of goods under Notification No. 30/14-CE they reversed 5% in terms of Rule 6 (3)(i) of Cenvat Credit Rules, 2004. It is observed that in Rule 6, sub-Rule (3D) was included under explanation with effect from 01.04.2011 which reads as under: "(3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken. 4.1 Payment of an amount of 5% in terms of sub-rule (3D) shall be deemed to be Cenvat Credit not taken for the purpose of an exemption Notification where in any exemption is granted on the condition that no Cenvat Credit of inputs and input services shall be taken. In terms of the above sub-rule (3D) in an exemption, if there is a condition of non-availmen....
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....ule 6 of Cenvat Credit Rules, 2004, which states as under: Payment of an amount under sub-rule (3) shall be deemed to "(3D) be Cenvat credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no Cenvat credit of inputs and input services shall be taken." 2. The ld. Counsel for the appellant submitted that exemption availing under the above-mentioned notification has been rightly claimed by the appellants. The findings of the original authority based on the explanation (3) of Rule 3 is misconceived. The deeming provision under Rule 6(3D) covers the present situation. Even without this sub-rule when the assessee follows the procedure under Rule 6(3)(i) they are entitled for exemption. He relied on the decision of the Tribunal in Life Long Appliances Ltd. - 2000 (123) E.L.T. 1110 (Tri. - Del.) and in Sita Singh & Sons (P) Ltd. - 2015 (327) E.L.T. 281 (Tri. -Del.). 3.The ld. AR reiterated the findings of the original authority. 4.We have heard both the sides and examined the records. 5.The short point for decision is the eligibility of the appellant for exemption under Notification N....
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.... value of exempted goods, in terms of provisions of Rule 6(3)(d). 3. The Revenue entertained a view that as the appellant had availed credit on common inputs which have been used in the manufacture of duty paid clearances as also exempted clearances and payment of 8% in terms of Rule 6(3)(d) is not sufficient, the conditions of Notification are violated. As such, the appellants are not entitled to the benefit of exemption notification. Accordingly the proceedings were initiated against them. The appellants during the course of adjudication, calculated the total credit availed by them in respect of inputs used in the manufacture of exempted final products. After taking into account the payment already made in terms of Rule 6, they debited the credit so availed by them to the extent of Rs.11,61,409/-. The said fact is recorded in the impugned order of the Commissioner (Appeals). 4. Short issue required to be decided is as to whether such reversal of credit, either by payment of 8% in terms of Rule 6 or by debiting the same from the Cenvat credit account, would result to satisfying the condition of notification in question. The condition of the notification is that n....
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....t of inputs used in the manufacture of final exempted goods or not. Inasmuch as the matter is being remanded for verification of above fact, the original adjudicating authority would also decide the issue of interest liability on the credit so availed and subsequently reversed in accordance with law. 7. As regard penalty, we agree with ld. Advocate that when exemption has been held to be admissible to the appellant no penalty is required to be imposed. 8. The appeal is disposed of in the above terms." 4.4 As per the above decision and the discussion made by us hereinabove, it is clear that the appellant by reversing 5% of the value of exempted goods in terms of Rule 6(3)(i) fulfilled the condition of Notification No. 30/2004CE. Therefore, the appellant are legally entitle for exemption Notification No. 30/2004-CE, and the demand is not sustainable." 4.8 In view of discussions as above we do not find any merits in the impugned order either on the merits of the case or on issue of limitation. As we set aside the demand, demand for interest and penalty imposed is also set aside. 5.1 Appeal is allowed. (Order pronounced in open court on-22 June 2026)....