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2014 (12) TMI 952 - AT - Central ExciseCENVAT Credit - goods become exempt after availing credit - export of goods - Applicability of Rule 6 and 11 of the Cenvat Credit Rules, 2004 - Exemption to Menthol Crystals BP/USP and Menthol BP/USP - Held that - In terms of Rule 6 (1) of the Cenvat Credit Rules, 2004, Cenvat credit shall not be allowed on such quantity of input or input services, which is used in the manufacture of exempted goods except in these circumstances mentioned in sub-Rule (2). In terms of sub-Rule (2) of Rule 6 ibid, when a manufacturer avails of Cenvat credit in respect of any input or input services and manufactures such final products which are chargeable to duty as well as the exempted goods, then the manufacturer shall either maintain separate account and inventory for the receipt, consumption of the inputs/input services meant for use in the manufacture of dutiable final product and exempted final product and take Cenvat credit only in respect of inputs/input services used in or in relation to manufacture of dutiable final product, or if does not maintain such account and inventory, in accordance with the provisions of sub-Rule (3) of Rule 6, he shall pay an amount either equal to 10%/5% of the sale price of the exempted final product or equal to the Cenvat credit involved on the inputs/input services used in or in relation to manufacture of exempted final products, to be calculated as per the provisions of this sub-Rule. From a plain reading of the above sub-Rule (3) of Rule 11, it is clear that this rule applies, if - (a) one or more duty paid inputs in respect of which Cenvat credit has been taken, have been used in or in relation to manufacture of a final product which up to a certain date was dutiable and (b) that final product has become fully exempt from duty whether on option basis or absolutely from a particular date. - if any stock of Cenvat credit availed inputs is lying in stock or is in process or is contained in the final products lying in the stock as on the date of exemption, the Cenvat credit involved in respect of such inputs lying in stock or in process or contained in final product lying in the stock would be required to be paid by the manufacturer, which he can do by deducting that amount from the Cenvat credit balance, if any, lying in his credit and the credit balance, if still left, shall lapse and the same cannot be utilized for payment of duty on any final product whether cleared for home consumption or for export or for payment of service tax on any output service whether provided in India or exported. Thus, in accordance with the provisions of this sub-rule, the balance credit shall lapse and cannot be utilized for any purpose whether for payment of duty on the domestic clearances or for payment of duty on the goods cleared for export. Provisions of sub-rule (1) of Rule 6 of the Cenvat credit Rule, 2004 are subject to the provision of sub-rule (6) of this rule and in the circumstances enumerated in various clauses of Rule 6(6), the provisions of sub-rule (1), (2) and (3) of Rule 6 are not applicable. The thrust of the Revenue s case is that the word excisable goods in sub-Rule (6) of Rule 6 of the Cenvat Credit Rules, 2002 should be read as dutiable goods and accordingly, the provisions of this sub-rule would not be applicable to the fully exempted finished products which have been exported out of India, and the Cenvat credit in respect of the same would not be admissible in accordance with the provisions of sub-Rule (1) of Rule 6. In other words, the contention of the Revenue is that when some finished products which are fully exempt from duty are exported out of India under bond/LUT, under Rule 19 of the Central Excise Rule, 2002, the provisions of sub-Rule (6) of Rule 6 would not be applicable and accordingly, the provision of sub-Rule (1), (2), (3) of Rule 6 would become applicable and, therefore, the Cenvat credit in respect of inputs used in or in relation to manufacture of such final product would not be admissible in accordance with the provisions of sub-Rule (1). Neither the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004, nor the provisions of Rule 6 (1) ibid are applicable to this case. As regards the Department s plea that the respondent cannot take cash refund of accumulated Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 as well as rebate of duty paid out of the same credit, since in this case, under Rule 5 of Cenvat credit Rules, 2004, prohibition is on claiming input duty drawback under Customs and Central Excise duties Drawback Rules, 1995 or the equivalent benefit of input duty rebate under Rule 18 of the Central Excise Rules and in this case, neither the input duty drawback under the Drawback Rules nor the input duty rebate under Rule 18 of the Central Excise Rules, 2002 has been claimed, this plea is not valid. None of the present show cause notices, which are the subject matter of present appeals, either this allegation has been made or any evidence in this regard has been discussed. In the three show cause notices which culminated in the order-in-original No. 20-22/D-I/2009 dated 31/03/09 passed by the Commissioner, there is not even a whisper of this allegation. Even in the written submissions wherein this plea has been made, no evidence in support of this allegation has been disclosed. In any case, such an evidence is yet to be evaluated, as the show cause notices issued to M/s Ambika International, M/s Fine Aromatics, M/s Jay Ambey Aromatics and M/s Shiva Mint Industries and also to the respondent have not been adjudicated. - present matter cannot be decided on the basis of allegations made in the subsequent show cause notice dated 07/03/13 issued to the respondent and the show cause notices dated 29/10/12 and 04/10/12 issued to the respondent suppliers M/s Ambika International, M/s Fine Aromatics, M/s Jay Ambey Aromatics and M/s Shiva Mint Industries. Those Show Cause Notices have to be adjudicated by the Commissioner independently and can t be referred to or introduced in the present proceedings. Accordingly, we have laid down the law, based upon the allegations made in the present Show Cause Notice, as the subsequent notices are not the subject matter of the present appeals. - Decided against Revenue.
Issues Involved:
1. Applicability of Rule 11(3) of the Cenvat Credit Rules, 2004. 2. Applicability of Rule 6(1) of the Cenvat Credit Rules, 2004. 3. Validity of cash refund claims under Rule 5 of the Cenvat Credit Rules, 2004. 4. Allegations of bogus transactions with suppliers in Jammu. Issue-wise Detailed Analysis: 1. Applicability of Rule 11(3) of the Cenvat Credit Rules, 2004: The primary question was whether the provisions of Rule 11(3) of the Cenvat Credit Rules, 2004, which require the reversal of Cenvat credit when a final product becomes fully exempt from duty, apply when only some of the final products become exempt while others remain dutiable. The Tribunal held that Rule 11(3) does not apply in this case because the respondent continued to manufacture dutiable final products. The Tribunal emphasized that Rule 11(3) is applicable only when all final products become fully exempt from duty, which was not the situation here. Therefore, the balance credit could still be utilized for payment of duty on the dutiable final products. 2. Applicability of Rule 6(1) of the Cenvat Credit Rules, 2004: The Tribunal considered whether the provisions of Rule 6(1) of the Cenvat Credit Rules, 2004, which disallow Cenvat credit on inputs used in the manufacture of exempted goods, would apply when the exempted goods are exported. The Tribunal referred to judgments from the Bombay High Court and the Delhi High Court, which held that the term "excisable goods" in Rule 6(6) includes both dutiable and exempted goods. Therefore, the provisions of Rule 6(1) do not apply to goods exported under bond, and the respondent was entitled to Cenvat credit for inputs used in the manufacture of exempted goods exported out of India. 3. Validity of Cash Refund Claims under Rule 5 of the Cenvat Credit Rules, 2004: The Tribunal addressed whether the respondent could claim a cash refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The Tribunal held that since the respondent did not claim input duty drawback or input duty rebate under Rule 18 of the Central Excise Rules, 2002, the prohibition in Rule 5 did not apply. Consequently, the respondent was entitled to a cash refund of the accumulated Cenvat credit. 4. Allegations of Bogus Transactions with Suppliers in Jammu: The Revenue alleged that the transactions between the respondent and their suppliers in Jammu were bogus and that the respondent had received only invoices without any actual supply of goods. However, the Tribunal noted that these allegations were not mentioned in the show cause notices that were the subject matter of the present appeals. The Tribunal emphasized that show cause notices form the foundation for levy and recovery of duty, penalty, and interest, and any new allegations cannot be introduced at the appellate stage. Therefore, the Tribunal did not consider these allegations and based its decision solely on the issues raised in the original show cause notices. Conclusion: The Tribunal concluded that neither Rule 11(3) nor Rule 6(1) of the Cenvat Credit Rules, 2004, were applicable in this case. The respondent was entitled to Cenvat credit for inputs used in the manufacture of exempted goods exported out of India and could claim a cash refund of the accumulated Cenvat credit. The allegations of bogus transactions were not considered as they were not part of the original show cause notices. The appeals by the Revenue were dismissed.
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