2014 (9) TMI 960 - AT - Central Excise

Benefit of Notification No. 7/2003-C.E., dated 1-3-2003 and Notification No. 30/2003-CC, dated 9-7-2004 - input where CVD paid is NIL - Non fulfillment of condition of the Notifications - From the language used in the exemption notifications it is observed that there is no prescribed condition that duty should be paid on the inputs. The only condition is that an assessee claiming these exemptions should not take any Cenvat credit. Also there is no such condition that unless the inputs are clearly recognisable as non-duty paid in these notifications. This interpretation also finds support from the decision given by CESTAT, Mumbai, in the case of Garware Marine Industries Ltd. and Others v. CCE, Aurangabad 2007 (10) TMI 607 - CESTAT MUMBAI - Decided in favour of assessee.

Summary

Issues:
Appeal against orders denying exemption under Notification No. 7/2003-C.E. and Notification No. 30/2004-CC for goods cleared in DTA by a 100% EOU.

Analysis:
The appellant, a 100% EOU, contested the denial of exemptions under the mentioned Notifications for clearing goods in DTA. The dispute revolved around duty payment on inputs and the obligation not to take Cenvat credit. The appellant argued that no duty was paid on inputs, fulfilling the conditions of the Notifications. Reference was made to the case law of Kumar Arch Tech Pvt. Ltd. and the H.P. High Court decision to support the argument that third-time cess was not applicable and only the effective rate of Central Excise Duty should be considered.

The Revenue contended that the appellant did not pay duty on inputs, rendering the exemptions inapplicable as per Section 5A of the Central Excise Act, 1944. The issue of effective duty rate on DTA clearances by a 100% EOU was clarified, citing the Himachal Pradesh High Court and CESTAT Larger Bench decisions. The Revenue emphasized that not taking Cenvat credit implied duty payment on inputs.

Regarding the admissibility of exemption under Notification No. 30/2004-C.E., the appellant argued that the condition was not about duty payment on inputs but refraining from taking Cenvat credit. The language of the Notification supported this interpretation, as highlighted by the case of Garware Marine Industries Ltd. The CESTAT Mumbai decision further reinforced that the benefit of exemption should not be denied if no duty credit was availed for the manufactured goods.

In conclusion, the Tribunal allowed the appeals, considering the legal precedents and the absence of duty credit on inputs. The decision clarified the conditions for availing exemptions under the Notifications and upheld the appellant's position based on the established legal principles.