2011 (4) TMI 27 - HC - Central Excise

Rebate - The assessee took credit of duty paid on menthol and utilized the said credit in paying the duty on clearance of the final products namely menthol crystals and peppermint oil - The assessee has cleared menthol crystals for export under bond without payment of excise duty and cleared peppermint oil for export on payment of excise duty by debiting the input credit availed on menthol used in the manufacture of final products - Excise duty paid on exported goods either in cash or by debiting the Cenvat credit availed on inputs used in the manufacture of exported goods can be claimed by the exporter as rebate of duty under Rule 18 of the Central Excise Rules 2002 - It is true that under Rule 6(1) of the 2004 Rules credit of duty paid on inputs is not allowable when the inputs are used in the manufacture of exempted final products. But Rule 6(2) of 2004 Rules provide that where the inputs are used in the manufacture of exempted as well as dutiable final products then credit of duty paid on inputs used in the manufacture of dutiable final products is allowable provided separate accounts regarding the receipt consumption and inventory of the input used in the manufacture of dutiable final product are maintained The assessee was entitled to avail the Cenvat credit of duty paid on menthol used in the manufacture of exempted menthol crystals and utilize the said credit for payment of duty on clearance of peppermint oil either for home consumption or for export. In the present case since the peppermint oil has been exported on payment of duty the assessee was entitled to claim rebate of the duty paid on peppermint oil - Decided in the favour of the assessee

Issues Involved:
1. Whether 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.
2. Applicability of Rule 6(1) to 6(4) and Rule 6(6)(v) of the CENVAT Credit Rules, 2004.
3. Validity of the input credit utilized by the assessee for payment of duty on peppermint oil.
4. Entitlement to rebate under Rule 18 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Entitlement to Rebate of Duty Paid on Export of Peppermint Oil:
The primary issue is whether the assessee can claim rebate of duty paid on the export of peppermint oil by utilizing the credit of duty paid on inputs used in the manufacture of exempted menthol crystals and dutiable peppermint oil. The court noted that the assessee has exported both menthol crystals and peppermint oil, and the entire quantity was exported without any domestic clearance. The assessee cleared menthol crystals under bond without payment of duty and cleared peppermint oil by debiting the input credit availed on menthol used in the manufacture of final products. The Commissioner (A) had allowed the rebate claims, which was upheld by the court.

2. Applicability of Rule 6(1) to 6(4) and Rule 6(6)(v) of the CENVAT Credit Rules, 2004:
The court examined the provisions of the CENVAT Credit Rules, 2004, particularly Rule 6(1) to 6(4) and Rule 6(6)(v). Rule 6(1) states that credit of duty paid on inputs is not allowable when the inputs are used in the manufacture of exempted final products. However, Rule 6(6)(v) provides an exception, stating that the provisions of Rule 6(1) to 6(4) do not apply when the exempted goods are cleared for export under bond without payment of duty. Since the assessee had cleared menthol crystals for export under bond, Rule 6(6)(v) was applicable, and Rule 6(1) to 6(4) did not apply in this case.

3. Validity of Input Credit Utilized for Payment of Duty on Peppermint Oil:
The court held that the credit of duty paid on menthol used in the manufacture of exempted menthol crystals is allowable because the exempted menthol crystals were exported under bond without payment of duty. Rule 5 of the 2004 Rules allows the credit of duty paid on inputs used in the manufacture of exempted final products to be utilized for payment of duty on any final product. Therefore, the assessee was entitled to utilize the input credit for paying the duty on peppermint oil cleared for export.

4. Entitlement to Rebate under Rule 18 of the Central Excise Rules, 2002:
The court concluded that since the assessee had utilized the input credit for paying the duty on exported peppermint oil, the assessee was entitled to claim the rebate of such duty under Rule 18 of the Central Excise Rules, 2002. The court rejected the revenue's argument that the input credit had lapsed or was unavailable, as the exempted menthol crystals were not cleared for home consumption but were exported under bond.

Conclusion:
The court dismissed the petition filed by the Commissioner of Central Excise and upheld the assessee's entitlement to the rebate of duty paid on peppermint oil amounting to Rs. 38,03,89,634/-. The court directed the registry to pay this amount to the assessee and denied the revenue's request for a stay of the order.

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