2016 (3) TMI 662 - AT - Central Excise

Exemption notification No. 64/95-CE - clearance of the goods to M/s. Mazgaon Dock which is meant for construction of Indian Navy warship - Held that - The goods supplied should be used in the construction of warship of Indian Navy and a certificate from the Indian Navy should be produced to the Central Excise officer. In the said condition, it is no where mentioned that the goods has to be supplied to Indian Navy. Therefore, there is no dispute that the goods supplied to Mazgaon Dock for manufacture of Indian Navy warship, therefore in our considered view there is no need that the goods should be supplied to Indian Navy only. The respondent is entitled for exemption notification No. 64/95-CE (Sr. No. 21) on their goods supplied for construction of warship of Indian Navy. As regard demand under Rule 6(3)(b), we find that the respondent have admittedly reversed the cenvat credit in respect of inputs used in exempted goods at the time of clearance of such exempted goods which tantamount to non-availment of credit. This view is supported by various judgments cited by the Ld. Counsel. Moreover as per the retrospective amendment made in Rule 6 vide Finance Act; the assessee is required to reverse the actual cenvat credit attributable to exempted goods. For this reason also the demand of 8% proposed in the SCN under Rule 6(3)(b) is not correct. We are therefore of the considered view that the order passed by the Ld. Commissioner is just and legal, which does not require any interference. We therefore, uphold the impugned order and dismiss the appeal filed by the Revenue. - Decided in favour of assessee

Summary

Issues:
1. Applicability of exemption notification on goods supplied to M/s. Mazgaon Dock for construction of Indian Navy warship.
2. Demand under Rule 6(3)(b) of Cenvat Credit Rules, 2002.

Issue 1:
The case involved a dispute regarding the applicability of an exemption notification on goods supplied to M/s. Mazgaon Dock for the construction of an Indian Navy warship. The respondent had cleared D.G. Sets and parts to Mazgaon Dock at nil central excise duty under Notification No. 64/95-CE. The Revenue contended that since the goods were supplied to Mazgaon Dock and not directly to the Indian Navy, the exemption was not admissible. The Ld. Commissioner dropped the demand of excise duty and the differential amount, leading to the Revenue's appeal. The respondent argued that the exemption was valid as the goods were intended for the construction of an Indian Navy warship, supported by a certificate from the Indian Navy. The Tribunal analyzed the relevant exemption entry and concluded that the goods supplied for the construction of an Indian Navy warship, regardless of the recipient, were eligible for the exemption. The Tribunal distinguished the case from the precedent judgment cited by the Revenue, emphasizing the specific conditions of the exemption entry. The Tribunal upheld the Ld. Commissioner's decision, ruling in favor of the respondent based on the exemption notification's clear provisions and the purpose of the goods supplied.

Issue 2:
Regarding the demand under Rule 6(3)(b) of Cenvat Credit Rules, 2002, the Revenue argued that the respondent should pay 8% of the value of exempted goods due to availed cenvat credit on inputs used in the exempted goods. The respondent contended that they had reversed the cenvat credit of inputs used in the exempted goods at the time of clearance, fulfilling the requirement. The Tribunal examined various judgments cited by the respondent, supporting the view that the respondent's action of reversing the cenvat credit at the time of clearance was sufficient compliance. Additionally, the Tribunal considered the retrospective amendment in Rule 6, which required the reversal of actual cenvat credit attributable to exempted goods. Based on the legal provisions and precedents, the Tribunal concluded that the demand proposed by the Revenue under Rule 6(3)(b) was incorrect. The Tribunal upheld the Ld. Commissioner's decision, stating that the respondent's compliance with the cenvat credit rules was in line with the law, and dismissed the Revenue's appeal.

In conclusion, the Tribunal ruled in favor of the respondent, upholding the applicability of the exemption notification on goods supplied for the construction of an Indian Navy warship, irrespective of the recipient. Additionally, the Tribunal found the respondent's compliance with the cenvat credit rules sufficient, dismissing the Revenue's demand under Rule 6(3)(b) of Cenvat Credit Rules, 2002.