2015 (9) TMI 459 - AT - Central Excise

Cenvat Credit on capital goods - Export of Yarn exempted from duty - The yarn meant for export was being cleared on payment of duty at the rate of 4% adv. and was being exported under rebate claim. Notification No. 30/2004-C.E. provides for full duty exemption to the items specified thereunder subject to condition that no input duty credit is availed. - Alternative Notification No. 29/2004-C.E. and Notification No. 29/2004-C.E - Held that - The contention of the Department is totally incorrect, as Exemption Notification No. 29/2004-C.E. is an unconditional exemption which prescribes a rate of duty of 4% ad valorem. There is no condition in this notification that for availing of this exemption prescribing concessional rate of duty of 4% adv., input duty Cenvat credit must be availed. The condition of non-availment of input duty Cenvat credit is for nil duty under Notification No. 30/2004-C.E. But this does not mean that an assessee not availing input duty credit cannot avail the exemption under Notification No. 29/2004-C.E., as this is an unconditional Notification. When an assessee does not avail of input duty credit, he has option to pay 4% duty under Notification No. 29/2004-C.E. and also the option to clear his goods at nil rate of duty under Notification No. 30/2004-C.E. and when two exemption Notifications are available to an assessee, he can always opt for the Notification which is most beneficial for him and in this regard the Department cannot force the assessee to avail a particular exemption Notification. Looked at from this point of view, the Department s stand is incorrect. Since during the period of dispute the appellant was clearing the goods by availing full duty exemption as well as on payment of duty, the capital goods cannot be treated as having been used exclusively in the manufacture of exempted goods and Cenvat credit in respect of the same cannot be denied. - Decided in favor of assessee.

Summary

Issues:
Interpretation of Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E. for availing duty exemptions and Cenvat credit.

Analysis:
During the period in question, the appellant, a manufacturer of yarn, availed exemptions under Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E. for different types of clearances. The Department contended that since the appellant did not avail input duty credit for clearances under Notification No. 29/2004-C.E., they were eligible for full duty exemption under Notification No. 30/2004-C.E. The Department issued show cause notices for recovery of wrongly availed capital goods amounting to Rs. 4,88,798 along with interest and penalties. The Deputy Commissioner upheld the demands, which were further upheld by the Commissioner (Appeals), leading to the filing of appeals.

The appellant argued that they did not avail input duty credit for any clearances and only availed capital goods Cenvat credit, which was permissible under Notification No. 30/2004-C.E. They contended that the goods cleared under Notification No. 29/2004-C.E. cannot be treated as exempted goods under Notification No. 30/2004-C.E. The appellant emphasized that since the capital goods were not exclusively used for manufacturing exempted goods, Rule 6(4) of Cenvat Credit Rules, 2004 should not apply, and capital goods Cenvat credit should not be denied.

The Department opposed the appellant's contentions, stating that the clearances under Notification No. 29/2004-C.E. at 4% duty were actually clearances of exempted goods, making Notification No. 30/2004-C.E. applicable. They argued that the capital goods were exclusively used for manufacturing exempted final products, making the appellant ineligible for capital goods Cenvat credit.

The Tribunal analyzed the submissions and records, noting that the appellant did not avail input duty credit for any clearances during the dispute period. The Tribunal rejected the Department's contention that the appellant had to avail full duty exemption under Notification No. 30/2004-C.E. since they did not avail input duty credit. The Tribunal emphasized that Notification No. 29/2004-C.E. provided an unconditional exemption with a 4% duty rate, allowing the appellant to choose between paying duty under this notification or clearing goods at nil rate under Notification No. 30/2004-C.E. The Tribunal concluded that since the appellant cleared goods under both exemptions, the capital goods could not be considered exclusively used for exempted goods, and therefore, capital goods Cenvat credit could not be denied.

In light of the above analysis, the Tribunal set aside the impugned orders, allowing the appeals filed by the appellant.