2013 (4) TMI 303 - HC - Central Excise

Whether Served From India Scheme (SFIS) can be treated as exempted goods for the purposes of Rule 6(3)(b) of Cenvat Credit Rules - Held that - The wordings of notification and subsequent CBEC Circular, would make it clear that the duty liability which has been debited in the SFIS scrip, would amount to discharge of duty liability and not amounting to exemption, as was proposed by Revenue. It is nobody s cases that the functioning of SFIS certificate is different then the functioning of DEPB scheme. In DEPB scheme the exporters are issued DEPE, which allow them specific amount to be utilised as customs duty, while the SFIS scheme, the service providers are issued SFIS certificate which allow them to import or procure indigenous goods without payment of duty by debiting the said script. - Decided against the revenue.

Summary

Issues:
1. Interpretation of Rule 6(3)(b) of Cenvat Credit Rules, 2004 regarding exempted goods and payment requirements.
2. Applicability of maintaining separate records for dutiable and exempted goods.
3. Comparison between different schemes under Central Excise and Customs Act.

Issue 1:
The main issue in this case revolves around the interpretation of Rule 6(3)(b) of Cenvat Credit Rules, 2004 concerning exempted goods and the requirement for payment. The Tribunal held that the assessee failed to maintain separate records for dutiable and exempted goods cleared against a Certificate issued under the "Served From India Scheme." Consequently, the assessee was directed to pay 10% of the value of the exempted goods as a penalty. The Tribunal's decision was based on the failure to maintain separate records, leading to the imposition of the penalty.

Issue 2:
The appellant contended that the decision of the Madras High Court in a similar case was not applicable as the facts differed. The appellant argued that Rule 6(3)(b) mandates separate accounts for manufacturers, and as the respondent did not maintain separate accounts, they should pay 10% of the total price. However, the Court disagreed with the appellant's argument, stating that the question was not raised before the lower authorities. The Court also noted that the schemes under consideration were different, one being under the Central Excise Act and the other under the Customs Act.

Issue 3:
The Court further analyzed the functioning of the SFIS certificate compared to the DEPB scheme. It was observed that the SFIS certificate allowed import or procurement of goods without duty payment by debiting the script, similar to the DEPB scheme's functionality. The Court found no difference in the functioning of the two schemes. Consequently, the Court upheld the Tribunal's decision, stating that no substantial question of law arose for consideration, and dismissed the Tax Appeal.

In conclusion, the High Court of Gujarat upheld the Tribunal's decision, emphasizing the importance of maintaining separate records for dutiable and exempted goods under the Cenvat Credit Rules. The Court clarified the applicability of different schemes and their impact on duty liabilities, ultimately dismissing the Tax Appeal.