2023 (6) TMI 585 - AT - Central Excise

CENVAT Credit - medicaments - exemption vide Notification No. 04/2006-CE dated. 01.03.2006 or not - Rule 6(3) of the Cenvat Credit Rules, 2004 - Section 11D of the Central Excise Act, 1944 - HELD THAT - The appellant during the disputed period had cleared the pharmaceutical products on payment of duty @5% and deposited / debited the amount in statutory records. It is the case of the revenue that the disputed goods cleared by the appellant are exempted from payment of duty vide Notification No. 4/2006 and hence the appellant was required to deposit the said amount alongwith interest in terms of Section 11D of the Act. In the present matter at the time of clearances of goods appellant paid duty @5%. It is seen that the Appellant did not retain the amount collected from the customers. The provisions of Section 11D of the Central Excise Act, 1944 will come into play only when an assessee collects an amount as an excise duty and does not credit it to the government treasury. The Tribunal in the case of STERLITE INDUSTRIES (INDIA) LTD. VERSUS COMMISSIONER OF C. EX., VAPI 2007 (9) TMI 232 - CESTAT, AHMEDABAD held that duty paid from Cenvat Account also excise duty and recovery under Section 11D of the Act is not sustainable - In the present case, the Appellant paid duty on the disputed goods and collected the amount from their customers as evident from the invoice. It is noted that the Appellant had not retained any amount and paid to the Government and, therefore, Section 11D of the Act cannot be invoked. So, the impugned order confirming demand under Section 11D is legally not correct. Whether Appellant was required to pay an amount of Rs. 62, 89,867/- (5% on clearances of disputed exempted goods) in terms of Rule 6 (3) of Cenvat Credit Rules 2004? - HELD THAT - It is seen that, at the material point of time, there were two rates of duty applicable to Medicine - one a nil rate prescribed under Notification No. 4/2006-C.E. as amended and the other 5% prescribed under Notification No. 2/2011-C.E., dated 01-03-2011. Both these rates were unconditional rates. Therefore, it is not the case that the goods have been completely exempted. The exempted goods referred to in Rule6 have to be excisable goods which are fully exempt from duty or as chargeable to nil rate of duty. When two different Notifications prescribe two rates of duty, the assessee is at liberty to opt for whichever is beneficial to him - it is not a situation where the duty credit on inputs were availed in respect of exempted goods and dutiable goods simultaneously. It is clear that the goods supplied under Notification No. 02/2011-C.E. is not exempted. Accordingly the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 is not applicable in the facts of the case. The demand confirmed by the adjudicating authority has no legs and therefore the same cannot be sustained. Accordingly, the impugned order is set aside and Appeal is allowed.

Summary

Issues:
The issues involved in the judgment are whether the appellant is liable to pay duty on wholly exempted goods under Section 11D of the Central Excise Act, 1944 and whether the appellant is required to pay an amount equal to five percent of the value of such wholly exempted goods under Rule 6(3) of the Cenvat Credit Rules, 2004.

Summary:

Issue 1 - Liability to Pay Duty on Wholly Exempted Goods:
The appellant had cleared certain medicaments on payment of duty despite being wholly exempted under Notification No. 04/2006-CE. The revenue contended that the amount paid by the appellant on exempted goods, collected from buyers as "duty of excise," must be deposited with the Central Government under Section 11D of the Act. The appellant argued that they did not unlawfully retain any collected amount and had paid duty at the relevant time. The Tribunal held that Section 11D applies when an assessee collects duty but does not credit it to the government, which was not the case here. The demand under Section 11D was deemed legally incorrect, and the impugned order confirming the demand was set aside.

Issue 2 - Payment of 5% on Wholly Exempted Goods:
The appellant availed Cenvat Credit on inputs used in manufacturing wholly exempted products and was required to pay an amount equal to five percent of the value of such goods under Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant argued that they chose to pay duty at a concessional rate under Notification No. 2/2011-CE, which was more beneficial. The Tribunal noted that when two notifications prescribe different duty rates, the assessee can opt for the more advantageous one. As the goods were not fully exempted but subject to a reduced rate, Rule 6(3) did not apply. The demand under Rule 6(3) was found inapplicable, and the impugned order was set aside.

Conclusion:
The Tribunal concluded that the demand confirmed by the adjudicating authority was unsustainable in both aspects. Therefore, the impugned order was set aside, and the appeal was allowed with any consequential relief in accordance with the law.