By TIOL News Service

NEW DELHI, JULY 03, 2015: AFTER reading these scathing comments made by the Bench, perhaps, if the senior officers are still in service they may like to get hold of the officer(s) who put the Review order for their signature and give them a piece of their mind - after all, all know who prepares these review orders! Or, is it the CERA that is responsible?

The short issue involved in this Revenue appeal is - Whether, in respect of goods cleared against International Competitive Bidding at nil rate of duty under exemption notification no. 6/06-CE (serial No. 301), the respondent assessee is required to pay an amount equal to 10% of the sale value of the goods as they had used common CENVAT Credit availed inputs/ input services for manufacture of dutiable final product as well as exempted final product and since they have not complied with the provisions of Rule 6(2) of the CCR, 2004 ( i.e. the assesse does not maintain a separate account and inventory in respect of inputs/ input services used in or in relation to manufacture of dutiable final product and exempted final product and confines Cenvat credit availment only to Inputs/Input services used in or in relation to manufacture of dutiable final product)?

The CCE, Meerut-I had dropped the demand of Rs.30,33,30,683/- and this was certainly blasphemous act in the eyes of the Committee of Chief Commissioners.

And so, the Revenue appeal came to be filed without any delay!

Be that as it may, we had almost seven years ago, covered this issue in DDT 925 , and which is reproduced below -

Audit's "Imported" objection

A Netizen sent us this mail informing us of a mind-boggling AG Audit objection. 

Here it goes- The assessee avails the benefit of Nil rate of duty in terms of Notification 6/2006- CE, Sr. No. 91 in respect of goods supplied against International Competitive bidding. 

There is a condition no. 19 appended to this notification which reads -

"19. If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India ."

The assessee satisfies this condition and clears the goods at Nil rate.

Now, comes the question of CENVAT Credit which he avails in respect of these goods which are also cleared on payment of duty.

The assessee points to Rule 6(6)(vii) of the CCR, 2004 and says that he is not required to either reverse any credit or pay any amount because the said sub-rule reads thus -

"(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-

X x x

(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of [notification No. 6/2002- Central Excise dated the 1st March, 2002 or notification No. 6/2006- Central Excise dated the 1st March, 2006, as the case may be.]"

In the above scenario, the mighty Audit [in its objection taken in the year 2006] had this to say -

"As per Rule 6(6), the provisions of sub-rules (1), (2), (3) and (4) (of the said rule 6) shall not be applicable in case the excisable goods removed without payment of duty are either, inter alia, all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable under section 3 of the Customs tariff Act when imported into India and supplied against International Competitive Bidding in terms of Notification 6/2002 or 6/2006. Thus the provisions of Rule 6(3)(b) shall not be applicable only if the goods cleared without payment of duty, under Notification no. 6/2006, are imported into India and supplied against International Competitive Bidding."

Rest assured that the assessee has been presented with a bouquet of demand notices running into Crores of rupees.

We are bewildered!

As mentioned, the Revenue is in appeal before the CESTAT and makes a forceful attempt to get back the Rs.30+ crores presumably ridiculously dropped by the adjudicating authority!

The Division Bench of the Tribunal patiently listened to what the AR reiterated from the Review order and the respondent too made his submissions in support of the dropped demand.

The Bench minced no words in deciding the fate of the Revenue appeal.

After extracting the relevant part of sub- rule 6 of Rule 6 of CCR, 2004, the CESTAT observed -

++ From plain reading of sub rule 6 it is clear that the provisions of sub rule (1),(2),(3) & (4) would not be applicable in case the excisable goods removed without payment of duty are the goods which if imported into India are exempt from the duties of customs leviable under customs tariff act and additional customs duty leviable under section 3(1) of the said Customs Tariff Act and have been supplied against international competitive bidding in terms of notification no. 6/06-CE dated 1.3.2006.

++ Thus, when the goods manufactured into India have been supplied against international competitive bidding, the same would be eligible for full duty exemption under notification no. 6/06-CE, if the same satisfy the condition prescribed in the notification that the same goods, if imported into India are fully exempt from customs duty as well as additional customs duty.

++ In terms of Clause (vii) of Rule 6(6), the provisions of sub rule (1) (2), (3) and (4) are not applicable in respect of such goods.

++ The Department's contention that clause (vii) of sub rule (6) is not applicable to the goods manufactured in India, but is applicable only to the imported goods is absurd, as the clause-(vii) cannot be read in isolation but has to be read with the main provision of sub rule 6.

++ Moreover Rule 6 of the Cenvat Credit Rules is in respect of the goods manufactured in India and this rule, in general, contains provisions regarding denial of cenvat credit in respect of inputs/ input services which have gone into the manufacture of exempted final products or exempted output services.

++ Sub rule 6 of Rule 6 enumerates the situations in which the cenvat credit would be available in respect of inputs/Input services even if the same have been used in or in relation to manufacture of final product which have been cleared at nil rate of duty or have been cleared without payment of duty like clearances for export under bond, supplies 100% EOU/SEZ units etc.

++ There is nothing in this sub rule from which it can be inferred that clause-(vii) is applicable to the goods imported into India.

The Revenue appeal was, therefore, dismissed.

And the parting shot of the Bench is the caption given to this news story.

(See 2015-TIOL-1317-CESTAT-DEL)