2013 (7) TMI 155 - CGOVT - Central Excise

Cenvat Credit - Separate Books of Accounts textile manufacturers - While availing benefit of both the Notifications 29/2004-CE & 30/2004-CE Held that - Considering practical difficulties of textile manufacturers in maintaining separate account of inputs, the Board issued Circular No. 845/3/2007-CX., dated 1-2-2007 and advised the assessee not to take credit initially and instead take proportionate credit on inputs used in the manufacture of finished goods that are cleared on payment of concessional duty under Notification No. 29/2004-C.E., dated 9-7-2004. The Board vide circular dated 1-2-2007, waived the requirement of maintaining separate account in the case of manufacturers, who wish to avail benefit of both the Notification No. 29/2004-C.E., dated 9-7-2004 and Notification No. 30/2004-C.E., dated 9-7-2004 simultaneously. Not availing benefit of Notification No.30/2004-C.E., dated 9-7-2004 Assessee opted for claiming higher duty drawback, the applicant stopped availing Cenvat credit on inputs. The Commissioner has perhaps assumed that by not availing facility of Cenvat credit on inputs, the applicant have automatically opted for exemption of duty under Notification No. 30/2004-C.E., dated 9-7-2004 in respect of export clearances. Held that - Even if the applicant have stopped availing Cenvat credit on inputs and switched over to duty drawback claim facility in respect of export shipment in question, that does not automatically mean that the applicant has decided to work under Notification No. 30/2004-C.E., dated 9-7-2004 in respect of export clearances. Also, the conclusion drawn by the lower authorities is based on assumptions and presumptions. It is a settled law that any order passed by an authority on the basis of surmises and conjectures, is not maintainable under law. It is well settled proposition of law that claim of any exemption notification in respect of any specific clearance is a matter of choice with the assessee and any beneficial piece of legislation cannot be forced on the assesse as held in Commissioner of Income-Tax Versus Arun Textile C And Another 2000 (3) TMI 3 - SUPREME Court . Decided in favor of assessee.

Summary

Issues Involved
1. Whether the applicant maintained separate accounts for availing Cenvat credit under different notifications.
2. Whether the applicant correctly availed Cenvat credit and rebate claims under Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E.
3. Whether the rejection of rebate claims by the lower authorities was justified.

Detailed Analysis

Issue 1: Maintenance of Separate Accounts
The primary contention was whether the applicant maintained separate accounts for goods availing Cenvat credit under Notification No. 29/2004-C.E. and goods availing full exemption under Notification No. 30/2004-C.E. The Commissioner (Appeals) held that the applicant failed to establish the maintenance of separate accounts as required by Circular No. 795/28/2004-CX., dated 28-7-2004. However, the applicant argued that this requirement was waived by Circular No. 845/3/2007-CX., dated 1-2-2007, which allowed proportionate input credit to be taken at the end of the month without maintaining separate accounts.

Issue 2: Availment of Cenvat Credit and Rebate Claims
The applicant claimed to have availed Cenvat credit only at the month-end based on actual consumption of inputs used in the manufacture of goods cleared on payment of duty under Notification No. 29/2004-C.E. They contended that they did not avail Cenvat credit on inputs used in the manufacture of goods cleared without payment of duty under Notification No. 30/2004-C.E. The applicant further asserted that they did not avail both notifications simultaneously for any particular clearance/shipment of goods, thereby not violating any conditions of Cenvat credit availment.

Issue 3: Justification of Rejection of Rebate Claims
The original authority rejected the rebate claims on the grounds that the applicant failed to prove that the exported goods were manufactured from inputs on which Cenvat credit was availed. The Commissioner (Appeals) upheld this decision, emphasizing the lack of separate accounts. The applicant argued that the rejection was based on assumptions and that they had provided sufficient records and calculations to show compliance with the Circular dated 1-2-2007. They also pointed out that they opted for higher duty drawback on export shipments and stopped availing Cenvat credit on inputs for this purpose, which was not considered by the lower authorities.

Conclusion and Remand
The Government observed that the requirement of maintaining separate accounts was dispensed with by the Circular dated 1-2-2007, and the applicant was advised to take proportionate input credit at the end of the month. Therefore, the rejection of the rebate claim based on non-maintenance of separate accounts was found untenable. The Government set aside the impugned orders and remanded the case back to the original authority for fresh consideration, ensuring that a reasonable opportunity of hearing is afforded to both parties. The revision application was disposed of accordingly.