2018 (2) TMI 807 - AT - Central Excise

CENVAT credit - N/N. 29/2004-CE dated 09/07/2004 and N/N. 30/2004-CE dated 09/07/2004 - allegation raised in the SCN is that the appellants are not eligible for the credit available on the components, spares and accessories of capital goods, for the reason that the final products cleared by them are exempted from payment of duty - Held that - identical issue decided in the case of The Commissioner of Central Excise Versus M/s. Same Duetz Fahr India (P) Ltd., Customs, Excise & Service Tax Appellate Tribunal 2017 (7) TMI 25 - MADRAS HIGH COURT , where it was held that India is a party to the WTO regime and, therefore, it is permissible for it to neutralise duties on inputs, whether in the form of goods or services - we see no difficulty in the Assessee s case falling in the exception carved out in Rule 6(6)(v) of the 2004 Rules. Demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing exemption under Notification No. 29/2004-CE and Notification No. 30/2004-CE
- Allegation of irregular credit availed on capital goods
- Interpretation of Rule 6(4) and Rule 6(5) of Cenvat Credit Rules, 2004
- Application of Rule 6(6) in case of excisable goods cleared for export under bond

Analysis:
The appellants, engaged in manufacturing 100% cotton yarn, were availing duty exemption under Notification No. 29/2004-CE and Notification No. 30/2004-CE. However, they faced allegations of irregularly availing Cenvat credit on capital goods exclusively used for manufacturing exempted final products attracting nil rate of duty. The issue revolved around the contravention of Rule 6(4) of Cenvat Credit Rules, 2004. The adjudicating authority and Commissioner (Appeals) upheld the demand, interest, and penalties imposed, leading to the appeal.

During the appeal, the appellants argued that they were not availing exemption under area or value-based clearance, making the allegation of exclusively using capital goods for exempted goods incorrect. They highlighted the export/clearance under bond of the finished goods, invoking Rule 6(6) of CCR, 2004. The appellants relied on a judgment by the Hon'ble High Court of Madras in a similar case to support their argument.

The core issue was the eligibility of the appellants for credit on components of capital goods used for exempted final products. The appellants invoked Rule 6(5) of CCR, 2004, which exempts excisable goods removed without duty payment under specific circumstances, including export under bond. The discussion delved into the interpretation of Rule 6(6) concerning the applicability of sub-rules in cases of excisable goods cleared for export under bond. The judgment referenced the objective of neutralizing duties on inputs for exporters to maintain competitiveness in foreign markets.

Based on the jurisdictional High Court's interpretation and the purpose behind Rule 6(6), the Tribunal concluded that the demand was unsustainable. The impugned order was set aside, and the appeal was allowed with consequential relief, aligning with the principles laid down by the High Court. The Tribunal dismissed the appeal of the Revenue, answering the legal question in favor of the assessee and against the Revenue, with no order as to costs.