2017 (11) TMI 2032 - AT - Central Excise

Demand of SAD - department has granted the rebate of the CVD - Purchase of imported Raw/Crude Naphthalene from the trader and availed the cenvat credit of CVD SAD - HELD THAT - Though the appellant was supposed to debit the SAD amount in respect of removal of inputs for export but non-debiting the SAD demand cannot be made for the reason that the raw/naphthalene on which the credit taken was admittedly exported. Once the goods have been exported no duty demand can be made. More over the appellant have been granted rebate in respect of CVD paid by them. Therefore even if had the appellant paid the duty at the time of removal, the same was refundable to them along with the CVD, therefore it is a clear case of revenue neutrality. Even there is a provision for removal of goods without payment of duty under bond, which takes care till the goods are exported and thereafter bond also stands discharged once the goods physically exported. In the facts of the present case there is no dispute about the physical export of goods therefore even as per Rule 19 of the Central Excise Rules, 2002 no duty is chargeable. The impugned order is set aside - Appeal is allowed.

Summary

Issues:
1. Cenvat credit availed on imported Raw/Crude Naphthalene
2. Demand of Special Additional Duty (SAD) on exported goods
3. Revenue neutrality and time bar considerations

Analysis:

Issue 1: Cenvat Credit Availed
The case involved the appellant purchasing imported Raw/Crude Naphthalene and availing cenvat credit of Countervailing Duty (CVD) & Special Additional Duty (SAD). The appellant exported the said input by debiting the CVD amount but did not debit the additional duty of excise. Subsequently, a rebate was claimed and sanctioned in respect of the CVD paid. The Revenue issued a show cause notice demanding the SAD amount on the exported goods. The adjudicating authority initially dropped the demand citing revenue neutrality and time bar from export clearances. However, the Commissioner (Appeals) allowed the Revenue's appeal, leading to further legal proceedings.

Issue 2: Demand of Special Additional Duty (SAD)
The key contention of the appellant was that since the goods on which cenvat credit was availed had been exported, they were not liable for duty. The appellant argued that the rebate granted for the CVD paid indicated that the demand of SAD was not sustainable. The Revenue, represented by the Superintendent (AR), reiterated the findings of the impugned order. The Member (J) analyzed the situation and concluded that once the goods had been exported, no duty demand could be made. The appellant had also been granted rebate for the CVD paid, leading to a situation of revenue neutrality. The provisions for removal of goods without payment of duty under bond were also considered, emphasizing that duty is not chargeable once goods are physically exported.

Issue 3: Revenue Neutrality and Time Bar
The Member (J) carefully considered the submissions from both sides and reviewed the records. It was noted that the appellant's failure to debit the SAD amount for export did not warrant a demand, especially since the raw naphthalene, on which credit was taken, was indeed exported. The decision to set aside the impugned order was based on the principle that duty demand cannot be made once goods have been exported, coupled with the rebate granted for the CVD paid. The Member (J) agreed with the adjudicating authority's decision to drop the demand, highlighting the provisions under Rule 19 of the Central Excise Rules, 2002, which further supported the conclusion that no duty was chargeable in the present case.

In conclusion, the appeal was allowed, and the impugned order was set aside in favor of the appellant, emphasizing the principles of revenue neutrality and the legal provisions governing duty on exported goods.