2012 (10) TMI 339 - CGOVT - Central Excise

Drawback rejection of fixation of brand rate of drawback alleged that there was no duty payable on aggregates in terms of Sr. No. 92 of the Notification No. 6/2006-C.E. - applicant has submitted that the duty exemption available against Sr. No. 92 is conditional because there is the condition that they are to be captivity consumed in the manufacture of tractor Held that - Such condition is not provided under column (5) of the said Notification No. 6-2006-C.E. The exemption is available to all goods captively consumed. Hence the exemption contained in the Notification No. 6/2006-C.E. at 1-3-2006 (Sr. No. 92) being absolute and unconditional is rightly covered under Section 5A (1A) of Central Excise Act 1944 and manufacturer has no option to pay duty on said exempted goods - availment of duty exemption was mandatory in terms of Section 5A (1A) of the Central Excise Act 1944 and no duty was payable on aggregate part of tractors application rejected

Summary

Issues Involved:

1. Violation of principles of natural justice.
2. Dutiability of aggregates used in the manufacture of tractors.
3. Interpretation of exemption notifications.
4. Eligibility for drawback on duty paid on inputs used in the manufacture of exported goods.
5. Contradictory stand by the Commissioner (Appeals) in different orders.
6. Applicability of Section 5A(1) and Section 5A(1A) of the Central Excise Act, 1944.
7. Re-credit of duty paid if drawback is not allowed.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The applicant contended that the Additional Commissioner of Central Excise did not grant a personal hearing before passing the order dated 10-2-2009, violating the principles of natural justice. This procedural lapse was argued to render the order incorrect and deserving of being set aside.

2. Dutiability of Aggregates Used in the Manufacture of Tractors:
The applicant paid duty on aggregates (IC engines, transmission assembly, and sheet metal components) used in manufacturing tractors for export. The adjudicating authority rejected the drawback claim on the grounds that these aggregates were exempt from duty under Notification No. 6/2002-C.E., dated 1-3-2002. The applicant argued that they were entitled to pay duty on these parts and claimed the drawback accordingly.

3. Interpretation of Exemption Notifications:
The applicant argued that the exemption under Sr. No. 92 of Notification No. 6/2006-C.E. was conditional, as it specified that parts must be captively consumed in manufacturing tractors. The respondent countered that the exemption was absolute and unconditional, as no specific condition was mentioned in column (5) of the notification.

4. Eligibility for Drawback on Duty Paid on Inputs Used in the Manufacture of Exported Goods:
The applicant claimed that since duties were paid on the aggregates used in manufacturing exported tractors, these should be considered for determining the brand rate of drawback. The respondent argued that the duty was paid voluntarily and with the intention to claim export benefits, which was not permissible.

5. Contradictory Stand by the Commissioner (Appeals) in Different Orders:
The applicant highlighted that the Commissioner (Appeals) had previously upheld the duty payment on aggregates in an earlier order dated 14-7-2009, which was contrary to the current impugned order. The respondent clarified that the earlier order dealt with the issue of interest on duty paid, not the dutiability of the aggregates.

6. Applicability of Section 5A(1) and Section 5A(1A) of the Central Excise Act, 1944:
The applicant argued that Section 5A(1A) applied only to absolute exemptions, not conditional ones. The respondent maintained that the exemption under Sr. No. 92 of Notification No. 6/2006-C.E. was absolute and mandatory, requiring the manufacturer to avail the exemption.

7. Re-credit of Duty Paid if Drawback is Not Allowed:
The applicant requested that if the drawback was not allowed, the duty paid on the aggregates should be re-credited. The respondent argued that the applicant's practice of paying duty and availing Cenvat credit was inconsistent and intended to derive unintended benefits.

Judgment:
The government upheld the lower authorities' decision, rejecting the applicant's claim for drawback on the grounds that the exemption under Sr. No. 92 of Notification No. 6/2006-C.E. was absolute and mandatory. The applicant's contention regarding the earlier order by the Commissioner (Appeals) was found untenable as it dealt with the issue of interest, not dutiability. The revision application was rejected for lack of merit.