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CX - When two exemption Notifications are available to an assessee, he can always opt for one which is most beneficial for him and in this regard Department cannot force assessee to avail particular exemption Notification - Stay granted: CESTAT

By TIOL News Service

NEW DELHI, OCT 15, 2013: THE appellants are manufacturers of 100% cotton yarn and Acrylic spun yarn.

During the period from April'09 to July'10, they received capital goods in respect of which they took CENVAT Credit. No credit was taken on Inputs.

The appellants were simultaneously availing the benefit of exemption Notifications No.29/2004-CE as well as No.30/2004-CE, both dated 09.07.2004. Whereas the Notfn No.29/2004-CE prescribes a concessional rate of duty of 4% for yarn without any condition, Notfn No.30/2004-CE provides for full duty exemption to the items specified thereunder subject to condition that no input duty credit is availed.

What the appellant did was avail the exemption notification 29/2004-CE in respect of yarn manufactured and cleared for export. Inasmuch as they paid duty @4% on the yarn exported under rebate claim.

In respect of domestic sales of yarn, the appellant cleared the same at Nil rate of duty by claiming the benefit of notification 30/2004-CE.

The Department took a view that since the appellant was eligible to clear goods at Nil rate of duty even for exports, payment of duty @4% and claiming rebate of the duty paid is incorrect and the duty so paid should be treated as “deposit”. Consequently, no credit could have been availed by the appellant on capital goods since the same have been used exclusively for manufacture of exempted goods in view of the provisions of Rule 6(4) of the CCR, 2004, the department alleged.

This view got translated into demand notices for recovery of CENVAT credit allegedly wrongly availed on capital goods along with proposal for imposition of interest and penalty. The Deputy Commissioner by a common order confirmed the demand along with interest and imposed a penalty of Rs.25,000/-. Since the Commissioner (Appeals) upheld this order, the appellant is before the CESTAT.

Whereas the appellant submitted that they cannot be forced to avail full duty exemption, the Revenue representative stuck to the departmental ideology.

The Bench inter alia observed -

+ When an assessee does not avail of input duty credit, he has option to pay 4% duty under Notification No. 29/2004-CE and also the option to clear his goods at nil rate of duty under Notification No.30/2004-CE 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.

Holding that the appellant has a strong prima facie case in favour, the requirement of pre-deposit of adjudged dues was waived and a stay granted. The stay applications were allowed.

In passing: Netizens may also see Board Circulars 795/28/2004-CX dated 28/07/2004, 845/03/2006-CX dated 01.02.2007.

(See 2013-TIOL-1515-CESTAT-DEL)


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