2010 (2) TMI 955 - CGOVT - Central Excise

Rebate claim goods cleared for home consumption without payment of duty - exporting the goods i.e. cotton yarn as well as polyester/viscose yarn, they pay Central Excise Duty and claim rebate of duty paid Held that - Respondent has not taken any Cenvat credit on the inputs utilized for the manufacture of the finished goods i.e. cotton yarn - They are clearing cotton yarn for domestic clearance free of duty under Notification No. 30/2004-C.E.. At the same time, they are clearing cotton yarn for export on payment of duty under Notification No. 29/2004-C.E. The respondent claiming rebate on the goods cleared under Notification No. 29/2004-C.E., dated 9-7-2004, have not availed any Cenvat credit on the inputs, and have paid duty as per the provisions of Rule 3(4)(a) of the Cenvat credit Rules, 2004 - respondent has complied with all the conditions of C.B.E. & C. Circulars No. 795/28/2004-CX., dated 28-7-2004 and have paid duty correctly, so, rebate is admissible to them.

Issues Involved:
1. Maintenance of separate accounts for dutiable and non-dutiable goods under Rule 6 of Cenvat Credit Rules, 2004.
2. Utilization of Cenvat credit for payment of duty on exported goods.
3. Compliance with Notifications No. 29/2004-C.E. and 30/2004-C.E.
4. Eligibility for rebate of duty paid on exported goods.

Detailed Analysis:

1. Maintenance of Separate Accounts for Dutiable and Non-Dutiable Goods:

The primary contention of the department was that the respondents failed to maintain separate accounts for inputs used in the manufacture of dutiable and non-dutiable goods, as mandated by Rule 6 of the Cenvat Credit Rules, 2004, and clarified by Board's Circular No. 795/28/2004-CX., dated 28-7-2004. The department argued that by not maintaining separate records, the respondents misused the rebate scheme by debiting duty from the credit accrued on inputs used in goods cleared domestically. However, the Commissioner (Appeals) and the Government found that the respondents maintained separate records for goods cleared under Notifications No. 29/2004-C.E. and 30/2004-C.E., as certified by the jurisdictional Range Superintendent. Therefore, the ground of not maintaining separate accounts was not upheld.

2. Utilization of Cenvat Credit for Payment of Duty on Exported Goods:

The department argued that the Cenvat credit utilized for payment of duty on exported cotton yarn had actually accrued from inputs used in the manufacture of polyester and viscose yarn cleared domestically, and thus, the respondents were not eligible for rebate on cotton yarn. The Commissioner (Appeals) interpreted Rule 3(4)(a) of the Cenvat Credit Rules, 2004, which allows Cenvat credit to be utilized for payment of duty on any final product. The Government upheld this interpretation, stating that there is no restriction in the Cenvat Credit Rules prohibiting the use of credit on certain inputs for payment of duty on another final product. Therefore, the respondents were entitled to utilize the Cenvat credit for payment of duty on exported goods.

3. Compliance with Notifications No. 29/2004-C.E. and 30/2004-C.E.:

The department contended that the respondents could not simultaneously clear goods for home consumption under NIL rate of duty and for export on payment of duty. The Government observed that the respondents were operating under both notifications as per the C.B.E. & C. Circular No. 795/28/2004-CX., dated 28-7-2004, and maintained separate records as required. The Government found no bar on the simultaneous availment of benefits under both notifications, provided separate accounts were maintained. The respondents complied with the conditions of both notifications, and there was no misuse of the rebate scheme.

4. Eligibility for Rebate of Duty Paid on Exported Goods:

The department's primary objection was that the respondents should not be allowed to claim rebate of duty paid on cotton yarn exported, as the Cenvat credit utilized accrued from inputs used in domestically cleared goods. The respondents argued that they correctly utilized the credit balance in their Cenvat account and paid duty on exported goods as per Rule 3(4)(a) of the Cenvat Credit Rules, 2004. The Government upheld the respondents' claim, stating that there is no provision in the rules prohibiting the use of credit on inputs for payment of duty on another final product. The Government also noted that the respondents complied with all conditions of the relevant circulars and notifications, making them eligible for the rebate.

Conclusion:

The Government concluded that the respondents complied with all conditions of the C.B.E. & C. Circulars No. 795/28/2004-CX., dated 28-7-2004, and correctly utilized the Cenvat credit for payment of duty on exported goods. The rebate claims were found to be admissible, and the revision applications filed by the Commissioner of Customs & Central Excise were rejected as devoid of merit. The impugned order-in-appeal was upheld.

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