By TIOL News Service

MUMBAI, JUNE 13, 2014: THE appellants are manufacturers of biscuits.

Biscuits manufactured by them and having a Retail Sales Price (RSP) of less than Rs.100/- per Kg. are exempted from CE duty in terms of Serial no. 18A of the Table annexed to Notification 3/2006-CE dated 01/03/2006 as amended.

But obviously, in respect of such biscuits, the appellant does not avail any CENVAT credit on the Inputs or Input Services.

Incidentally, the same biscuits are also manufactured and exported under bond without payment of duty in terms of Rule 19 of the CER, 2002. And the appellant avails CENVAT credit on the Inputs/Input Services used in the manufacture of the said biscuits.

The Revenue is of the view that the CENVAT credit availed is incorrect and the ground taken is that the goods are exempted from excise duty when sold in the domestic market.

The adjudicating authority viz. CCE, Thane-I found this 'biscuit and CENVAT' allegation of the Revenue to be a tantalizing one so much that he confirmed the demand of Rs.80.08 lakhs and imposed an equivalent penalty and interest.

Against these adjudged dues, the appellant is before the CESTAT.

Their primary submission is that the requirement of affixing MRP under the SWAM Act, 1976 read with the Packaged Commodities Rules, 1977 applies only to goods sold in India in retail and does not apply to goods exported. Therefore, the exemption provided under Serial no. 18A applies only to the goods sold in the domestic market and has no application whatsoever in respect of export products. Consequently, there is no bar in availing the CENVAT credit on the inputs/input services used in or in relation to the manufacture thereof. They have also sought the support of Board Circular no. 625/16/2002-CX dated 28/02/2002 wherein it is clarified that RSP is not required to be printed in certain specified situations and one of the situations mentioned in the said Circular is "goods meant for export".

The Bombay High Court decision in Repro India Ltd. 2007-TIOL-795-HC-MUM-CX holding that CENVAT credit is admissible on inputs/input services used in or in relation to manufacture of goods exported, even if such goods are exempt when sold in the domestic market, is also relied upon. It is, therefore, pleaded that the Rs.1.60 crore confirmed demand should be set aside and the appeal be allowed.

There was nothing more that the Revenue representative could add except parroting the findings of the adjudicating authority.

The Bench made the following pithy observations -

"5.1 Law made in India applies to the whole of India or within the territory situated in India. They do not have extra territorial jurisdiction. This applies to Standards of Weights and Measures Act, 1976 and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Therefore, the requirement of affixing MRP is only meant for goods required to be sold in India and it has nothing to do with the goods exported. Therefore, any exemption given on the basis of MRP applies to goods sold in India and has no application whatsoever in respect of identical goods exported. The case laws cited by the appellants also confirm these facts. As held by the Hon'ble High Court of Bombay in Repro India Ltd. case (cited supra), even in respect of exempted goods, CENVAT credit can be availed on inputs/input services if such goods are exported."

In fine, holding that there was no merit in the order passed by the Commissioner of Central Excise, Thane-I , the same was set aside and the appeal was allowed with consequential relief.

In passing : Some chai pe charcha this…

(See 2014-TIOL-1018-CESTAT-MUM)