2024 (1) TMI 387 - AT - Central Excise

Scope of exemption notification - Absolute exemption or conditional exemption - Liability to pay 5%/6% of the value of the goods cleared under Notification No. 108/1995-CE under Rule 6(i) of Cenvat Credit Rules, 2004 - eligibility of N/N. 04/2006-CE dated 01.03.2006 - whole case of the department is that when Notification No. 04/2006-CE was available to the appellant, which is the absolute notification, the appellant was supposed to clear the goods under said notification. Whether the Notification No. 04/2006-CE is absolute or conditional? - whether the appellant was mandatorily required to avail such notification? HELD THAT - The issue that whether the exemption notification No. 04/2006-CE (Sr. No. 54 and 59) are conditional or otherwise, It was held that the said notification is conditional one in the appellant s own case, for which the order was passed by this Tribunal vide final order No. 11450-11451/2023 dated 07.07.2023 2023 (7) TMI 360 - CESTAT AHMEDABAD . From the above judgment, it can be seen that this Tribunal has categorically held in para 4.2 of the order that Notification No. 04/2006-CE (Sr. No. 54 and 59) is conditional one, therefore, it is an option for assessee either to avail such exemption or not. In the present case, the goods were supplied under notification No. 108/1995-CE depending upon the nature of supplies and as per Rule 6(6)(iv) the provision of Sub Rule (1), (2), (3) and (4) shall not be applicable. Accordingly, the appellant is on one hand eligible for Cenvat credit and is not required to pay 5% in terms of Rule 6(3) of Cenvat Credit Rules, 2004 accordingly, the demand of 5% is not sustainable. Moreover, it is a settled legal position that when two beneficial provisions are available to the assessee, it is the choice of the assessee to avail the more beneficial provision, which is settled in SHARE MEDICAL CARE VERSUS UNION OF INDIA 2007 (2) TMI 2 - SUPREME COURT and COLLECTOR OF CENTRAL EXCISE, BARODA VERSUS INDIAN PETRO CHEMICALS 1996 (12) TMI 66 - SC ORDER . The demand of 5% is not sustainable, hence, the impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether Notification No. 04/2006-CE is absolute or conditional.
2. Whether the appellant is mandatorily required to avail Notification No. 04/2006-CE.
3. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004.
4. Time-barred nature of the demand.
5. Personal penalty on Shri Vinayak Shirodkar.

Summary:

Issue 1: Whether Notification No. 04/2006-CE is absolute or conditional.
The Tribunal examined whether Notification No. 04/2006-CE (Sr. No. 54 and 59) is conditional. It was held that the notification is conditional, as it does not grant exemption to all goods in the chapter but only to specific items listed. Therefore, it is optional for the appellant to avail the exemption under Notification No. 04/2006-CE.

Issue 2: Whether the appellant is mandatorily required to avail Notification No. 04/2006-CE.
The Tribunal found that since Notification No. 04/2006-CE is conditional, the appellant was not mandatorily required to avail it. The department's insistence on the mandatory availing of this notification to demand 5% under Rule 6(3) of Cenvat Credit Rules, 2004 was deemed unsustainable.

Issue 3: Applicability of Rule 6(3) of Cenvat Credit Rules, 2004.
The Tribunal concluded that Rule 6(3) of Cenvat Credit Rules, 2004 applies only if inputs are used in both dutiable and exempted goods. Since the appellant did not avail the exemption under Notification No. 04/2006-CE and paid excise duty on goods cleared for export, the demand under Rule 6(3) was not applicable. Furthermore, the Tribunal referenced several judgments supporting the view that Cenvat credit cannot be denied on inputs used in exported goods, even if the final products are exempt.

Issue 4: Time-barred nature of the demand.
The Tribunal noted that the show cause notice was issued beyond the normal period of limitation, invoking the extended period. Given that the appellant maintained proper records and there was no suppression of facts, the demand was found to be time-barred. The Tribunal cited several judgments to support this conclusion.

Issue 5: Personal penalty on Shri Vinayak Shirodkar.
Since the demand against the appellant company was not sustainable, the personal penalty imposed on Shri Vinayak Shirodkar under Rule 15A of Cenvat Credit Rules, 2004 was also set aside.

Conclusion:
The Tribunal held that the demand of 5% under Rule 6(3) of Cenvat Credit Rules, 2004 was not sustainable on both merit and limitation grounds. The impugned order was set aside, and the appeals were allowed. The Tribunal emphasized that when two beneficial exemptions are available, the more beneficial one should be allowed to the assessee.