2013 (4) TMI 468 - CGOVT - Central Excise

Claim of duty drawback on aggregates - adjudicating authority rejected the applicants claim for drawback of the duty on aggregates on the ground that the applicant was not liable to pay duty on the aggregates - Held that - Section 5A(1A) would apply only in the case where the exemption from the whole of the duty is granted absolutely - When the notification grants exemption from the whole of the duty by stipulating the condition in the notification then such notification is not covered under Section 5A(1). i.e. unconditionally, no duty was payable on aggregate/part of tractors. Interpretation of notification no. 6/2002 - sr. no. 296 - held that - it is evident that the relevant entry provides for description of excisable goods and column No. (5) specified the condition, Sr. No. 296 of the said Notification No. 6/2002-C.E. provides parts, used within the factory of production for manufacture of goods of heading 8701 in column No. (3) and Nil condition in column No. (5). Thus, all the parts used within the factory of production for manufacture of goods falling under 8701 attracts nil duty without any condition. The details mentioned in column (3) is not in the nature of condition but in the nature of how it is to be consumed. The exemption is available to all goods captively consumed. Hence the exemption contained in the Notification being absolute/ unconditional - No refund or duty drawback - decided against the assessee.

Issues Involved:
1. Violation of principles of natural justice.
2. Eligibility for duty drawback on parts (aggregates) used in the manufacture of tractors.
3. Interpretation of Notification No. 6/2002-C.E. as amended by Notification No. 23/2004-C.E.
4. Applicability of Section 5A(1A) of the Central Excise Act, 1944.
5. Consistency in the decisions of the Commissioner (Appeals).

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The applicant contended that they were not granted a personal hearing before the order dated 20-7-2009 was passed by the Additional Commissioner of Central Excise. This omission was argued to be a violation of the principles of natural justice, rendering the decision incorrect and unsustainable. The applicant also claimed that the Commissioner (Appeals) did not consider various grounds made in the memorandum of appeal.

2. Eligibility for Duty Drawback on Parts (Aggregates) Used in the Manufacture of Tractors:
The applicant, a manufacturer and exporter of tractors and their parts (referred to as "aggregates"), paid duty on these parts and sought a drawback of the duty paid on inputs used in the manufacture of exported tractors. The adjudicating authority rejected the claim for drawback on the grounds that the applicant was not liable to pay duty on the aggregates, as they were exempt under Notification No. 6/2002-C.E., as amended by Notification No. 23/2004-C.E. The applicant argued that duties were undisputedly paid on IC engines, transmission assemblies, and sheet metal components used in the manufacture of tractors cleared for export, and no credit was taken on such duty paid. Therefore, these duties should be considered while fixing the brand rate of drawback.

3. Interpretation of Notification No. 6/2002-C.E. as Amended by Notification No. 23/2004-C.E.:
The applicant contended that the exemption granted to parts of tractors under Notification No. 6/2002-C.E., as amended, was conditional since it specified that the parts must be captively consumed in the manufacture of tractors. This made the exemption conditional and not absolute. The Commissioner (Appeals) was criticized for not recognizing this conditionality, which the applicant argued was inherent in the description of the excisable goods listed under entry No. 296 of the notification.

4. Applicability of Section 5A(1A) of the Central Excise Act, 1944:
The applicant argued that Section 5A(1A) of the Central Excise Act, 1944, which mandates the availment of duty exemption when granted absolutely, did not apply to their case because the exemption under Notification No. 6/2002-C.E. was conditional. They contended that the manufacturer has the option to avail or not to avail the exemption notification, and duties paid on materials used in the manufacture of exported goods should be considered for determining the duty drawback.

5. Consistency in the Decisions of the Commissioner (Appeals):
The applicant highlighted that the Commissioner (Appeals) had previously held in an order dated 14-7-2009 that duty was payable on such aggregates, making the current impugned order contrary to the earlier decision. However, the government noted that the earlier appeal concerned the interest on payment of duty, not the dutiability of the aggregates, and the duty was paid by the applicant voluntarily.

Government's Observations and Decision:
The government observed that the relevant entry in Notification No. 6/2002-C.E., as amended, specified "parts, used within the factory of production for manufacture of goods of heading 8701" with a nil duty rate and no conditions in Column No. (5). This indicated that the exemption was absolute and unconditional. Consequently, the manufacturer had no option to pay duty on the exempted goods under Section 5A(1A) of the Central Excise Act, 1944. The lower authorities' rejection of the application for fixation of the brand rate of drawback was upheld, as no duty was payable on the aggregates/parts of tractors.

Conclusion:
The revision application was rejected as devoid of merit, and the impugned Order-in-Appeal was upheld. The government found no infirmity in the decision, confirming that the exemption under Notification No. 6/2002-C.E., as amended, was absolute, and no duty was payable on the parts used in the manufacture of tractors.

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