central excise notification no 30/2004 & rule 6 (3) amended vide not no 13/2016 _CE (NT) dated 10.03.2016, Central Excise

[Richa Goyal]

Sir,

we are a texturising unit and eligible to clear goods without payment of duty under notification No. 30/2004 provided we do not take credit of the duty paid on inputs.

Dept states that we are required to reverse 6% as per Rule 6 (3) amended vide noti no 13/2016- CE dated 01.03.2106.

Kindly guide.

Posts / Replies

[KASTURI SETHI]

(1) First let me know whether the department has demanded reversal of 6% by way of letter. Is it verbal communication ?

(2) Have you taken credit on inputs ? If so, straightway exemption from Central Excise duty will be disallowed as Rule 6 (3) of Cenvat Credit Rules, 2002/2004 is not applicable to this situation.

(3) If credit has not been taken, what is the basis of asking for reversal of 6%. As per Rule 6(3), reversal of 6% is required on the price of exempted goods. When credit has not been taken, the question of reversal of 6% does not arise.

(4) Notification No.13/2016-CE(NT) dated 1.3.16 is not applicable retrospectively. It is effective from 1.4.16.

[Richa Goyal]

The department has demanded reversal of 6% of the value of goods under rule 6(3A) by way of notice. Thereafter, a show cause notice was issued demanding 6% of the value of exempted goods.

We had not taken credit of the input used in goods exported under notification No. 30/2004. Based on the notification No. 13/2016 dated 01.03.2016, the department still states that we are still liable to reverse 6% of the value of exempted goods. This is relating the period May, 2016 to April, 2017 as covered in the show cause notice.

The operative part of the order states that :

”the respondent shall specifically show their option as to whether they would like to retain the exemption without Cenvat Credit or would like to avail the said credit. If they go for retention of exemption, they have to reverse the amount under rule 6(3) of Canvet Credit Rules, 2004 as amended with effect from 01.04.2016 vide notification no. 13/2016-CE (NT) dated 01.03.2016 and if choose later one, they have to pay full duty on the exempted goods cleared during the relevant period and then there would not be any requirement/ attraction of reversal of amount under 6(3) ibid.

Kindly advice

[KASTURI SETHI]

Firstly, Such SCN is not sustainable at all. It is misconceived. This is such an SCN which may be dropped at the first stage i.e. by the Adjudicating Authority passing Order-in-Original provided that reply must be properly drafted with full legal force. Natural justice is your fundamental right which lies in dropping the demand.

Secondly, exported goods are treated as duty-paid goods. You can trace out case laws in this support.Thus no reversal under Rule 6(3 A) is required if goods are exported.

Thirdly, option is to be exercised again only if option already exercised in terms of Notification No.30/2004-CE dated 9.7.2004 is to be changed.

Fourthly, Notification No.13/16-CE (NT) dated 1.3.16 is for new entrant. You are already complying with CE law.

[KASTURI SETHI]

In continuation of my reply dated 16.7.19, if there is an interpretational dispute, the exemption cannot be denied. You have not caused any loss to revenue. Non-filing of option (not applicable to this case) is a mere procedural lapse and for procedural lapse maximum penalty of ₹ 2000/-/5000/- is imposable under Rule 26/27 of Central Excise Rules, 2002 respectively. In this case, no mala fide intention is involved. Hence Section 11 AC of CEA, 1944 cannot be invoked. Burden of proof is cast upon the department to prove that the noticeee has acted in a mala fide manner and not upon the Noticee.

[KASTURI SETHI]

Courtesy to express thanks to TMI costs nothing.

[Richa Goyal]

Sir

I am extremely grateful to you and TMI for your guidance in the matter. You have been extremely helpful with your prompt response.

Thanks a lot Sir.