2018 (12) TMI 488 - AT - Central Excise

Refund of accumulated credit - inputs used in the exempted export goods - case of the department is that the goods exported by the respondent are exempted from Central Excise duty and appellant is not entitled to CENVAT Credit and refund is denied - Held that - There is no dispute that the Revenue accepting proposal of the respondent to export the goods under Bond and the LUT allowed the export. Therefore, the export of goods under bond/ LUT is not under dispute. As per Rule 6 (6) (v) it is provided that if the goods are exported under Bond/LUT Rule 6 (1), (2) and (3) are not applicable and the fact of the same is that though the goods manufactured and exported by the respondent is exempted but they are entitled for the Cenvat Credit in respect of inputs. It is also observed that as per notification 42/2001-CE (N.T.) dated 26/06/2001, manufacturer, exporter is required to export all excisable goods under Bond/ LUT. Therefore, even though the finished goods are exempted, the same is allowed to be exported under Bond/ LUT. Therefore, the availment of Cenvat Credit by the respondent is not objectionable - refund is allowed. Monetary amount involved in the appeal - Held that - Except the one appeal no. E/11633/2018 which involve refund amount of ₹ 20,22,895/- in all other appeals, the amount involved is less than 20 lakhs, therefore, all those appeals are not maintainable also in view of Government s litigation policy issued vide circular no. F.No. 390/Misc/116/2012 dated 11/07/2018. Appeal allowed in part.

Summary

Issues Involved:
1. Whether the exempted goods can be exported under Bond/LUT.
2. Whether Rule 6(6)(v) of Cenvat Credit Rules, 2004 applies to the export of exempted goods under Bond/LUT and whether Cenvat credit could have been availed by the appellants in respect of inputs used in the manufacture of exempted goods exported.
3. Whether CBEC Circular No.754/70/2003-CX dated 09.10.2003 applies to the present case.
4. Whether refund under Rule 5 of Cenvat Credit Rules, 2004 is admissible in respect of Cenvat credit availed on inputs used in the manufacture of exempted goods which are exported under Bond/LUT.
5. Whether the lower authority violated the principles of judicial discipline in passing the present impugned orders.

Issue-wise Detailed Analysis:

1. Export of Exempted Goods under Bond/LUT:
The Tribunal confirmed that exempted goods can indeed be exported under Bond/LUT. This conclusion was based on Notification No. 42/2001-CE (NT) dated 26.06.2001, issued under Rule 19 of the Central Excise Rules, 2001, and the definition of "excisable goods" under Section 2(d) of the Central Excise Act, 1944. The Tribunal upheld the previous decision by the Commissioner (A) and noted that the Department had not appealed against the Tribunal’s earlier decision, indicating that this issue had attained finality.

2. Applicability of Rule 6(6)(v) of Cenvat Credit Rules, 2004:
The Tribunal found that Rule 6(6)(v) of Cenvat Credit Rules, 2004 applies to the export of exempted goods under Bond/LUT. This rule bars the applicability of Rule 6(1), (2), (3), and (4) in such cases, allowing the availment of Cenvat credit on inputs used in the manufacture of exempted goods exported. The Tribunal cited previous decisions, including the Commissioner (A)’s order and the Tribunal’s own rulings, which had consistently upheld this interpretation.

3. Applicability of CBEC Circular No.754/70/2003-CX dated 09.10.2003:
The Tribunal determined that CBEC Circular No.754/70/2003-CX dated 09.10.2003, which clarifies that no credit can be taken on inputs exclusively used in the manufacture of exempted final products, does not apply in this case. The appellants were manufacturing both exempted and dutiable goods and maintained separate accounts as required under Rule 6(2) of Cenvat Credit Rules, 2004. Therefore, the circular was not applicable as the appellants were not taking credit on inputs exclusively used for exempted goods.

4. Admissibility of Refund under Rule 5 of Cenvat Credit Rules, 2004:
The Tribunal concluded that refund under Rule 5 of Cenvat Credit Rules, 2004 is admissible for Cenvat credit availed on inputs used in the manufacture of exempted goods exported under Bond/LUT. The Tribunal noted that the objections raised by the Adjudicating Authority were not sustainable and that no other conditions specified in the relevant notification under Rule 5 had been contravened.

5. Violation of Judicial Discipline:
The Tribunal criticized the lower authority for violating the principles of judicial discipline by disregarding higher appellate decisions that had attained finality. The Tribunal emphasized the importance of following precedents set by higher appellate authorities, citing the Supreme Court’s judgment in the case of UOI v/s Kamlakshi Finance Corporation Ltd. The Tribunal found that the lower authority’s reliance on unrelated Supreme Court judgments was misplaced and that the adjudicating authority had erred in its interpretation and application of the law.

Conclusion:
The Tribunal upheld the decision of the Commissioner (A), allowing the refund of Cenvat credit on inputs used in the manufacture of exempted goods exported under Bond/LUT. The Tribunal also granted interest on the refund amounts from the ninety-first day from the date of filing the relevant refund applications to the date of refund. The appeals by the Revenue were dismissed, and the Tribunal emphasized the necessity of adhering to judicial discipline in quasi-judicial proceedings.