2018 (5) TMI 1398 - AT - Central Excise

CENVAT credit - export through merchant exporter - carbon black procured without payment of duty against advance license - N/N. 43/2001-CE (NT) - procedural and technical infirmities. - case of the Revenue is that appellants are not entitled to benefit of exemption N/N. 43/2001- CE (NT) for the goods exported through merchant exporters, as the appellant has not followed ARE-2 procedure - Held that - The said notification/ Rule does not put bar that the goods cannot be exported through merchant exporters. As per Rule 19 (2) of the said Rules, any material may be removed without payment of duty from the factory of producer or manufacturer or warehouse or from any other premises for use in the manufacture or processing of goods which are exported, as may be approved by the Commissioner - The only condition is that the goods must be exported and it is immaterial that the said goods have been exported directly by the assessee or through the merchant exporters therefore, benefit of notification cannot be denied. Although the appellant has mentioned the N/N. 43/2001-CE (NT) in their application, but they are entitled to the benefit of N/N. 44/2001-CE (NT), as they exported the goods under simplified procedure without following the ARE-2 procedure, as per CBEC Circular No. 648/39/2002-CX dated 25.07.2002. CENVAT credit on carbon black procured without payment of duty cannot be denied merely on procedural lapse on the part of the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against duty and penalties imposed for procuring inputs without payment of duty under Notification No. 43/2001-CE (NT) due to procedural and technical infirmities.

Analysis:
The appellants, engaged in manufacturing various goods, exported products exempt from duty under advance licenses and procured inputs against these licenses. They sought to procure carbon black without duty under Notification No. 43/2001-CE (NT) but were later deemed non-compliant, leading to duty demands and penalties. The Commissioner (Appeals) ruled against the appellants for non-compliance, prompting the appeals.

The appellant's counsel argued that despite a procedural error in citing the notification number, the appellant fulfilled export obligations, justifying the duty-free procurement of carbon black. The counsel emphasized the technical error should not negate compliance with export conditions, especially when the export of goods was undisputed.

The Revenue contended that the appellants were ineligible for the exemption under Notification No. 43/2001-CE (NT) due to not following the ARE-2 procedure for goods exported via merchant exporters. However, the Tribunal noted that the rules did not prohibit exports through merchant exporters and cited precedents supporting duty exemption despite procedural lapses, emphasizing the importance of actual exportation.

Citing relevant case law, the Tribunal highlighted that procedural lapses, such as not following specific export procedures, should not invalidate duty exemptions when goods were otherwise eligible. The Tribunal referenced previous judgments and a CBEC Circular to support its decision that a procedural lapse should not lead to the denial of Cenvat credit on carbon black procured without duty.

Ultimately, the Tribunal found no merit in the impugned orders, setting them aside and allowing the appeals with any consequential relief. The decision underscored the importance of actual exportation and the eligibility for duty exemptions based on the substance of compliance rather than technical errors in documentation.

This detailed analysis of the judgment showcases the procedural and technical intricacies involved in the case, the arguments presented by both parties, the legal precedents cited, and the Tribunal's reasoning leading to the final decision to set aside the impugned orders and allow the appeals.