2011 (8) TMI 981 - AT - Central Excise

Rebate of duty - Applicability of provisions of Rule 6(3) of the Cenvat Credit Rules 2004 - Notification No 29/2004-CE - Notification No 59/2008 - Different rate of prescribed under both notifications - Simultaneous availment of both notification - Held that - As per the show cause notice in respect of the demand amounting to Rs.2, 50, 81, 937/- the cotton fabrics have been exported under bond and therefore in terms of Rule 6(6)(v) of Cenvat Credit Rules the demand is unsustainable. As regards the balance amount of Rs.76, 81, 014/- wherein the cotton fabrics have been exported under claim for rebate of duty it is seen that at the material point of time there were two rates of duty applicable to cotton fabrics - one a nil rate prescribed under Notification No 29/2004-CE as amended and the other 4% adv. prescribed under Notification No 59/2008 dated 07/12/2008 Both these rates were unconditional rates. Therefore it is not the case that the goods have been completely exempted. When two different Notifications prescribed two rates of duty the assessee is at liberty to opt for whichever is beneficial to him. It is further on record that the assessee had consulted the department and as per the department s advice the assessee had opted for payment of duty @ 4% under claim for rebate in respect of exports in some cases. Therefore it is not a situation where the duty credit on inputs were availed in respect of exempted goods and dutiable goods simultaneously. Hence the provisions of Rule 6(3) of the Cenvat Credit Rules 2004 do not appear to be applicable in the facts of the case - Stay granted.

Summary

Issues:
- Interpretation of Cenvat Credit Rules, 2004 regarding the applicability of Rules 6(1), 6(2), and 6(3) to export of goods.
- Discrepancy in rates of duty on cotton fabrics under Notification No. 29/2004-CE and Notification No. 59/2008-CE.
- Whether separate maintenance of accounts for dutiable and exempted goods is required.
- Consultation with departmental authorities regarding duty payment on cotton fabrics.
- Applicability of Rule 6(6)(v) of Cenvat Credit Rules to the demand made under Rule 6(3).

Analysis:
1. The appeal challenged an order by the Commissioner of Central Excise regarding the demand for payment under the Cenvat Credit Rules, 2004. The appellant, a fabric manufacturer, faced a demand of Rs.3,26,99,951 for allegedly availing CENVAT credit on inputs used in manufacturing both dutiable and exempted goods without separate accounts maintenance. The demand was based on Rule 6(1), 6(2), and 6(3) read with Rule 14 of the Cenvat Credit Rules, 2004, along with interest and penalties.

2. The appellant contended that the Cenvat Credit Rules did not apply to exports and argued that they had paid duty on cotton fabrics exported at different rates based on two notifications in operation during the relevant period. They claimed that since they had consulted jurisdictional authorities for clarification on duty payment, the demand was not sustainable. The appellant relied on a Bombay High Court judgment to support their argument against the demand.

3. The department, represented by the JCDR, supported the Commissioner's findings and argued that the appellant had not disclosed the composition of the exported cotton fabrics to the department. They maintained that the two notifications did not provide for different rates on cotton fabrics as claimed by the appellant.

4. Upon careful consideration, the Tribunal noted that the demand made under Rule 6(3) was unsustainable for cotton fabrics exported under bond, as per Rule 6(6)(v) of the Cenvat Credit Rules. Regarding fabrics exported under claim for rebate, the Tribunal found that since two different duty rates were applicable, the appellant had the option to choose the beneficial rate. The Tribunal observed that the appellant had followed the department's advice on duty payment, indicating a lack of simultaneous availing of duty credit on inputs for exempted and dutiable goods.

5. Consequently, the Tribunal found in favor of the appellant, granting a complete waiver of pre-deposit of the dues adjudged in the impugned order and staying the recovery during the appeal's pendency. The decision was based on the appellant's strong case and compliance with the duty payment advice received from the departmental authorities.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's decision based on the interpretation of relevant provisions and precedents.