2013 (9) TMI 841 - AT - Central Excise

CENVAT credit - Cleared excisable goods - whether debit Against Served from India Scheme (SFIS) certificate, at nil rate of duty availing exemption under Notification 34/2006-C.E would made the goods exempted goods - separate accounts of inputs used in the manufacture of dutiable goods and in the exempted goods were not maintained, the appellant was required to pay 10% of the total price of exempted goods as per Rule 6(3)(b) of Cenvat Credit Rules, 2004 - no such payment was made - imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 - debits made under DEPB script is equivalent to payment of duty in cash Held that; It is nobody s case that the functioning of SFIS certificate is different then the functioning of DEPB scheme. In DEPB scheme the exporters are issued DEPB which allow them specific amount to be utilized 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 - debits made in SFIS would not amount to exemption from payment of duty - Following decision of UNIVERSAL POWER TRANSFORMER PVT. LTD. Versus C. C. E., BANGALORE 2010 (5) TMI 411 - CESTAT, BANGALORE - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellants are liable to pay an amount equal to 10% of the value of the exempted goods?
2. Whether the goods cleared under 'Served from India Scheme' are leviable to Nil rate in the tariff or chargeable to duty?
3. Whether the appellants were required to reverse the CENVAT credit of 10% of the value of the goods?
4. Whether the Tribunal's decision in the case of Universal Power Transformers Pvt. Ltd. v. CCE, Bangalore is applicable in this case?

Analysis:
1. The appellants, engaged in manufacturing road equipment under Chapter 84 of the Customs Excise Tariff Act, availed CENVAT credit on inputs used for exempted goods without maintaining separate accounts. The Original Authority demanded payment equal to 10% of the value of the exempted goods, amounting to Rs. 15,10,000, along with a penalty of Rs. 5,000. The Commissioner (Appeals) upheld this decision, leading the appellants to file an appeal/stay petition.

2. The main contention raised was regarding the tariff applicability on goods cleared under the 'Served from India Scheme'. The appellants argued that these goods were not leviable to Nil rate in the tariff and were chargeable to duty as per Notification No. 34/2006-C.E. They claimed that the goods were not exempted, as defined under the CENVAT Credit Rules, 2004. Citing a precedent from the Tribunal Bangalore Bench, the appellants contended that debits made in SFIS would not amount to exemption from duty.

3. The Tribunal acknowledged the strength of the appellants' contention, indicating a favorable view towards their argument. Considering the circumstances of the case, the Tribunal found merit in the appellants' claim and granted a stay on the pre-deposit of duty and penalty until the finalization of the appeal.

4. The Tribunal's decision in the case of Universal Power Transformers Pvt. Ltd. v. CCE, Bangalore, which held that debits made in SFIS would not amount to exemption from duty, was deemed relevant to the present case. The Tribunal allowed the Stay Petition based on the arguments presented by the appellants and the precedent cited, setting aside the Original Authority's decision and granting relief to the appellants.