CX - CESTAT is correct in allowing CENVAT credit availed on raw material used for manufacture of exempted goods which have been exported under bond: High Court
By TIOL News Service
JAIPUR, SEPT 07, 2018: THIS is a Revenue appeal.
The respondent assessee manufactures Life Saving Drugs.
The period involved is April 2006 to March 2007.
Sub-section (1A) inserted on 13.5.2005 in section 5A of the CEA, 1944 reads:-
(1A) for the removal of doubts, it is hereby declared that where an exemption under subsection (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods.
The assessee has been clearing life saving drugs for export under bond in addition to clearance in the domestic market. They were also taking the credit in respect of inputs used in the manufacture of exempted life saving drugs on the basis of Sub-Rule 6 of Rule 6 of the Cenvat Credit Rules, 2004 cleared for export under bond as per Rule 19 of Central Excise Rules, 2002.
It is the Revenue contention that since the goods i.e. life saving drugs were unconditionally exempted by notification 6/2006-CE dated 01.03.2006, it cannot be the sweet will of the manufacturer to avail or not to avail the same, rather, the manufacturer was bound to avail the exemption notification in view of section 5A(1A) of CEA, 1944; that the assessee was not eligible to take CENVAT Credit in respect of inputs used in the manufacture of exempted goods which were exported; that the irregular Cenvat credit so taken and utilized for payment of duty on clearance of other dutiable goods in the domestic market is recoverable.
The Commissioner(A) allowed the appeal filed by the assessee and, therefore, the Revenue went in appeal before the CESTAT.
The CESTAT had dismissed the Revenue appeal and which was reported by us as - 2017-TIOL-1836-CESTAT-DEL thus –
CX - Assessee engaged in manufacture of patent or proprietary medicaments classifiable under Tariff Heading No. 30.04 of CETA, 1985 - Besides manufacture of medicaments, which are chargeable to duty, they also manufacture life saving medicaments, which were exempted from whole of duty of excise under Notfn 6/2006-CE - Assessee has claimed Cenvat credit on inputs which was used in manufacture of medicines and same was also exported - Adjudicating authority has allowed the claim of assessee - By following the ratio laid down in Repro India Ltd. 2007-TIOL-795-HC-MUM-CX and Sharp Menthol India Ltd. - 2011-TIOL-490-HC-MUM-CX, no reason found to interfere with impugned order: CESTAT
As mentioned, Revenue is before the Rajasthan High Court.
The respondent assessee relies on the decisions in M/s. Repro India Ltd. - 2007-TIOL-795-HC-MUM-CX , Sharp Menthol India Ltd. - 2011-TIOL-490-HC-MUM-CX , Drish Shoes Ltd. - 2010-TIOL-350-HC-HP-CX, Jolly Board Ltd. 2014-TIOL-316-CESTAT-MUM (Revenue appeal dismissed by Bombay High Court on 02 September 2016), Same Duetz Fahr India (P) Ltd. and Ors. - 2017-TIOL-1259-HC-MAD-CX, Spice Telecom, Bangalore - 2006-TIOL-146-SC-CUS-LB to submit that no substantial question of law arises in this appeal.
The High Court noted that the substantial question of which was framed by the appellant reads:-
"1. Whether the Hon'ble CESTAT is correct in allowing the Cenvat credit availed on the raw material used for the manufacture of the exempted goods which have been exported under bond?"
The High Court observed -
"9. While considering the matter, the Commissioner (Appeal) has given detail reasons and the Tribunal has only followed the Bombay High Court decision in case of Repro India Ltd. Vs. Union of India - 2007-TIOL-795-HC-MUM-CX and also another decision.
9.1 In our considered opinion, the Tribunal has also considered the judgment of Union of India Vs. Sharp Menthol India Ltd. - 2011-TIOL-490-HC-MUM-CX which was upheld by the Hon'ble Supreme Court in Union of India Vs. Sharp Menthol India Ltd. - 2015 (320) ELT A 104 (SC) and there is nothing on record to show that the Bombay High Court decision is diluted. On the contrary, in one of the matter, SLP which came to be decided on 12th July, 2016 in Civil Appeal No.2887/2012 (Commissioner of Central Excise, Chandigarh Vs. M/s Drish Shoes Ltd.) , the judgment of Bombay High Court has been approved."
Holding that it is in complete agreement with the view taken by the Commissioner (Appeals) and the Tribunal, the Revenue appeal was dismissed.
(See 2018-TIOL-1833-HC-RAJ-CX)
