2013 (7) TMI 303 - CGOVT - Central Excise

Dispute was with regard to whether an assessee can avail the benefit of either of the abovesaid two notifications whichever is beneficial to him or he is bound to avail the unconditional exemption under Notification No. 29/2004-C.E. as amended, during the period under dispute in terms of the provisions of Section 5A(1A) of the Central Excise Act, 1944 - contention of applicant that he has the option to avail one notification which suits him if more than one notification exist, was relevant when the provision of sub-section (1A) of Section 5A did not exist prior to 13-5-2005. The said sub-section (1A) was inserted into section 5A w.e.f. 13-5-2005 by Section 75 of Finance Act, 2005 (18 of 2005). Held that - The Ministry of Law has opined that the language used in the said Section 5A(1A) is unambiguous and principles of harmonious construction cannot be applied in the instant case in view of the specific provision under sub-section (1A) of Section 5A of the Central Excise Act. The Law Ministry has accordingly concluded that in view of the specific bar provided under sub-section (1A) of Section 5A of the Central Excise Act, the manufacturer cannot opt to pay the duty under Notification 59/2008-C.E., dated 7-12-2008 and he cannot avail the Cenvat Credit of the duty paid on inputs. Notification No. 29/2004-C.E. & 30/2004-C.E. can be availed simultaneously will also apply to the amended notification as the nature of notification does not change does not hold good because a specific Circular No. 937/27/10-C.E., dated 26-11-2010 was issued by C.B.E. & C. w.r.t. Notification Nos. 29/2004-C.E. as amended by Notification No. 58/2008-C.E., dated 7-12-2008 and Notification No. 59/2008-C.E., dated 7-12-2008

Summary

Issues Involved:

1. Eligibility for rebate of duty under Notification No. 59/2008-C.E.
2. Applicability of Section 5A(1A) of the Central Excise Act, 1944.
3. Entitlement to avail Cenvat credit on inputs and capital goods.
4. Validity of dual notifications and the option to choose between them.

Detailed Analysis:

1. Eligibility for Rebate of Duty under Notification No. 59/2008-C.E.:

The applicants, engaged in the manufacture of various fabrics, cleared goods for export under Notification No. 59/2008-C.E. at a duty rate of 4%, despite an unconditional exemption from duty under Notification No. 29/2004-C.E. The rebate claims for the duty paid were rejected by the adjudicating authorities and upheld by the Commissioner (Appeals) on the grounds that Section 5A(1A) of the Central Excise Act, 1944, prohibits the payment of duty when an unconditional exemption is granted.

2. Applicability of Section 5A(1A) of the Central Excise Act, 1944:

Section 5A(1A) clearly states that if an exemption from the whole duty of excise has been granted absolutely, the manufacturer shall not pay the duty. The applicants argued that they had the option to choose between two notifications, but this argument was relevant only before the insertion of Section 5A(1A) on 13-5-2005. The provision of Section 5A(1A) overrides any conflicting notification, as confirmed by the Board's Circular No. 937/27/2010-C.E., dated 26-11-2010, and the Ministry of Law's opinion.

3. Entitlement to Avail Cenvat Credit on Inputs and Capital Goods:

The applicants availed Cenvat credit on inputs and capital goods, which was contested by the department. The issue of wrongly availed Cenvat credit is pending before the CESTAT and was not considered in this judgment. The Board's Circular No. 940/01/2011-CX., dated 14-1-2011, clarified that manufacturers cannot opt to pay duty on fully exempted goods and cannot avail Cenvat credit on inputs used for such goods.

4. Validity of Dual Notifications and the Option to Choose Between Them:

The applicants contended that they could choose between Notification No. 29/2004-C.E. and Notification No. 59/2008-C.E. However, the government observed that Section 5A(1A) mandates that if an exemption is granted absolutely, the manufacturer has no option to pay duty. The Board's Circular No. 795/28/2004-C.E., dated 28-7-2004, which allowed simultaneous availing of exemptions, was deemed not applicable after the issuance of Circular No. 937/27/10-C.E., dated 26-11-2010, which specifically addressed the amended notifications.

Conclusion:

The government upheld the orders-in-appeal, finding no merit in the applicants' contentions. The revision applications were rejected, affirming that the applicants were not entitled to rebate of duty paid under Notification No. 59/2008-C.E. due to the absolute exemption provided by Notification No. 29/2004-C.E., as amended. The provisions of Section 5A(1A) were deemed applicable, and the Board's circulars were binding on the department.