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2018 (7) TMI 2069 - HC - Central ExciseCENVAT Credit - inputs used in exempted goods, which is exported under bond - contravention of Rule 6(1) of Cenvat Credit Rules, 2004 - benefit of N/N. 6/2006-C.E., dated 1-3-2006 as amended availed - Whether the Hon ble CESTAT is correct in allowing the Cenvat credit availed on the raw material used for the manufacture of the exempted goods which have been exported under bond? HELD THAT - Having paid excise duty on the import of raw material, the assessee-respondent is entitled for exemption of the Cenvat credit under Rule 6(6) clause (v) of the Cenvat Credit Rules, 2004. Reliance placed in the case of REPRO INDIA LTD. VERSUS UNION OF INDIA 2007 (12) TMI 209 - BOMBAY HIGH COURT where it was held that If the exempted products are exported outside India the provisions of Rule 6(6)(v) of CCR are applicable. Therefore, the bar provided u/r 6(1) and the liability created u/r 6(3)(b) are not attracted. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Wrong availment of Cenvat credit on inputs used in exempted goods. 2. Applicability of Rule 6(6) of the Cenvat Credit Rules, 2004 for goods cleared for export under bond. 3. Interpretation of Section 5A(1A) of the Central Excise Act, 1944 regarding absolute exemption. 4. Eligibility of Cenvat credit for inputs used in the manufacture of exempted goods exported under bond. Issue-wise Detailed Analysis: 1. Wrong Availment of Cenvat Credit on Inputs Used in Exempted Goods: The appellant challenged the Tribunal's decision, which upheld the Commissioner (Appeals)’s order allowing the assessee to avail Cenvat credit on inputs used in the manufacture of exempted life-saving drugs. The department contended that the assessee was liable to pay Central Excise Duty amounting to ?33,18,196/- due to the wrong availment of Cenvat credit on inputs used in exempted goods, contravening Rule 6(1) of the Cenvat Credit Rules, 2004 (CCR, 2004). 2. Applicability of Rule 6(6) of the Cenvat Credit Rules, 2004 for Goods Cleared for Export Under Bond: The assessee argued that they were entitled to take credit for inputs used in the manufacture of exempted life-saving drugs cleared for export under bond as per Rule 19 of the Central Excise Rules, 2002 (CER, 2002). Rule 6(6) of CCR, 2004 exempts the application of sub-rules (1), (2), (3), and (4) when excisable goods are cleared for export under bond. The Tribunal and Commissioner (Appeals) supported this view, emphasizing that the provisions of Rule 6(6) applied to goods cleared for export under bond, allowing the assessee to avail Cenvat credit. 3. Interpretation of Section 5A(1A) of the Central Excise Act, 1944 Regarding Absolute Exemption: The appellant cited Section 5A(1A) of the Central Excise Act, 1944, which states that when an exemption is granted absolutely, the manufacturer cannot opt to pay duty on such goods. The appellant argued that since Notification No. 6/2006-C.E. granted absolute exemption to life-saving drugs, the assessee was bound to avail the exemption and could not take Cenvat credit on inputs used for these exempted goods. However, the Tribunal found that the assessee was clearing the goods for export under bond, which is an exception under Rule 6(6). 4. Eligibility of Cenvat Credit for Inputs Used in the Manufacture of Exempted Goods Exported Under Bond: The respondent's counsel argued that Rule 6(6)(v) of the CCR, 2004 explicitly allows for the availment of Cenvat credit on inputs used in the manufacture of goods cleared for export under bond. The Tribunal supported this interpretation, citing several judgments, including Repro India Ltd. v. Union of India, Union of India v. Sharp Menthol India Ltd., and Commissioner of Central Excise v. Drish Shoes Ltd., which upheld the view that Cenvat credit is permissible for inputs used in the manufacture of exempted goods if those goods are exported under bond. Conclusion: The High Court dismissed the appeal, agreeing with the Tribunal and Commissioner (Appeals) that the assessee was entitled to avail Cenvat credit on inputs used in the manufacture of exempted life-saving drugs cleared for export under bond. The court found no substantial question of law, affirming that Rule 6(6)(v) of the CCR, 2004 provided a clear exemption for such cases, and the assessee's actions were in compliance with the relevant rules and notifications.
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