2017 (9) TMI 217 - AT - Central Excise

Deemed export - Clearances to 100% EOU - recovery of CENVAT credit - non-maintenance of separate set of books for exempted and dutiable goods - Held that - the goods supplied against CT-1 to EOU are specified in exception to Rule 6(6) itself - the benefit of Rule 6(6) of Cenvat Credit Rules, 2004 is allowed to the appellant in respect of the goods exported under LUT and CT-1. In respect of the sales to the domestic tariff area, the appellant would be entitled to adjustment of duty paid against the reversal of Cenvat Credit on inputs used in manufacture of exempted products - In respect of exports against rebate, the matter is remanded back to the adjudicating authority to verify whether the rebate claimed has been returned back by cash by the appellant and if so, the amount paid back in cash be adjusted against 10% of value of exempted goods. Goods cleared for export - mode of export - Held that - neither in their submissions before the Ld. Commissioner (Appeals) nor elsewhere is it mentioned whether the export was against LUT/CT-1/rebate, hence, these facts needs to be verified by the adjudicating authority - matter is remanded back to the adjudicating authority for verification as to the mode of export (whether under CT-1/LUT/rebate) and to pass a fresh order in accordance with law. Appeal allowed by way of remand.

Summary

Issues:
1. Interpretation of Notification No. 04/06-CE regarding exemption of certain compounds.
2. Treatment of exempted goods under Cenvat Credit Rules.
3. Disallowance of Cenvat Credit on inputs exclusively used in manufacturing exempted goods.
4. Applicability of Rule 6(6) of Cenvat Credit Rules to goods chargeable to nil duty.
5. Verification of rebate claims and adjustments against duty paid.

Analysis:
1. The appellants contested the imposition of duty on Homatropine compounds despite their exemption under Notification No. 04/06-CE. The Revenue argued that the duty paid on these compounds could not be considered under Section 3 of the Central Excise Act. Two show cause notices were issued for Cenvat Credit recovery and disallowance on inputs used in manufacturing exempted goods.

2. The appellants relied on legal precedents to support their claim that Rule 6(6) of the Cenvat Credit Rules applies to both exempted and dutiable goods. The Tribunal referenced the judgment of the Himachal High Court and held that the appellants were eligible for Cenvat Credit on inputs used in manufacturing exempted goods.

3. Regarding the rebate claims, the Tribunal differentiated between goods exported under bond and those cleared on payment of duty. Citing a previous case, it ruled that the appellants were liable to pay 10% of the value of exempted goods for those not exported under bond.

4. The Tribunal directed the adjudicating authority to verify if the rebate claimed had been returned in cash by the appellants and adjust the amount against the 10% value of exempted goods. For goods cleared under domestic sales, the duty paid would be treated as a reversal of Cenvat Credit on inputs.

5. In another appeal, the mode of export needed verification, and the Tribunal remanded the case for a fresh order based on the verified facts. The appeals were disposed of accordingly, with specific instructions for each issue raised by the appellants.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented by both parties, relevant legal precedents, and the Tribunal's final decision on each matter.