By TIOL News Service

NEW DELHI, FEB 02, 2015: AFTER reading the caption, one may say, this is not news. Such decisions have been pronounced eons ago and they are right. But the department is not convinced in this basic philosophy and tries to tweak it at every possible opportunity.

In the present case, the department armed with its age-old concept of not allowing an assessee to pay duty on his own volition chose to knock down the assessee by using the baton of the CENVAT Credit Rules, 2004.

It is not known whether the provision of section 5A(1A) of the CEA, 1944 that made its appearance by the FA, 2005 (w.e.f 13.05.2005) were leaned upon obliquely.

Be that as it may, the facts of the present case go thus-

The appellant manufactures Yarn.

During the period September 2009 to May 2010 they were availing exemption Notification No. 29/2004-CE as well as Notification No.30/2004-CE, both dated 09.07.2004.

Notification No. 29/2004-CE prescribes concessional rate of duty of 4% for yarn without any condition and as such the appellant could avail input duty CENVAT Credit. The yarn meant for export was being cleared under claim of rebate on payment of duty at the rate of 4% adv..

Notification No. 30/2004-CE provides for full duty exemption subject to condition that no input duty credit is availed. This exemption was being availed in respect of clearances of yarn intended for domestic consumption.

During the period of dispute, the appellant had not taken any input duty credit in respect of goods cleared under either of the notifications 29/2004-CE and/or 30/2004-CE but they have availed CENVAT Credit in respect of capital goods.

The Department had a twisted view. It was of the opinion that the appellant assessee ought not to have cleared the goods for export on payment of duty as they were entitled for the nil rate of duty in terms of notification 30/2004-CE since they had not taken any credit on inputs and, therefore, what was paid on their own volition was "deposit" and not duty. Inasmuch as since the goods were exempted, the appellant could not have availed credit of duty paid on capital goods in view of rule 6(4) of the CCR, 2004 as by the department logic they had been exclusively used in manufacture of "exempted goods".

SCNs visited the appellant assessee seeking recovery of the CENVAT credit allegedly irregularly availed on the capital goods and the adjudicating authority put an end to the journey of the SCNs. Suffice to say that the demand(s) was confirmed and the Commissioner(A) put his stamp of approval on the same.

Before the CESTAT the appellant explained the characteristics of the notifications in question and submitted that the Appellant cannot be forced to avail full duty exemption under Notification No. 30/04-CE; that the goods cleared under Notification No.29/04-CE cannot be treated as exempted goods covered by Notification No.30/04-CE; that since the capital goods were not exclusively used for manufacture of exempted goods, the provision of Rule 6(4) of CCR,2004 are not applicable and the credit cannot be denied.

The AR took pains to justify the stand of the department.

The Bench after considering the submissions observed –

6. There is no dispute that during period of dispute, the clearances for domestic consumption had been made by the appellant at nil rate of duty by availing the Notification No. 30/2004-CE and clearances for export had been made on payment of 4% duty under Notification No. 29/2004-CE. There is also no dispute that during the period of dispute no input duty credit had been availed and only capital goods CENVAT Credit had been availed in respect of which there is no prohibition in Notification No. 30/04-CE. Thus the Appellant even in respect of clearances made under Notification No.29/2004-CE also, had not availed input duty credit, though in respect of these clearances, they could have availed the input duty CENVAT Credit. The point of dispute is as to when the appellant have not availed input duty credit, whether they have option to avail the Notification No. 29/2004-CE where the rate of duty is 4%. The Department's contention is that once the appellant have not availed any input duty credit and they have become eligible for Notification No.30/2004-CE, they have no option but to avail of the exemption notification 30/2004-CE only and they cannot opt from Notification No.29/2004-CE and pay 4% the duty and in such a situation if any duty payment has been made, it would have to be treated as deposit and the clearances would be have to be treated as clearances of fully exempted goods made under Notification No. 30/2004-CE and accordingly the Appellant would not be eligible for capital goods CENVAT Credit. This contention of the Department is totally incorrect, as Exemption Notification No. 29/2004-CE is an unconditional exemption which prescribes a rate of duty of 4% ad valorem. There is no condition in this notification that for availing of this exemption prescribing concessional rate of duty of 4% adv., input duty CENVAT Credit must be availed. The condition of non-availment of input duty CENVAT Credit is for nil duty under Notification No, 30/2004-CE. But this does not mean that an assessee not availing input duty credit can not avail the exemption under Notification No. 29/2004-CE, as this is an unconditional Notification. 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 can not force the assessee to avail a particular exemption Notification. Looked at from this point of view, the Department's stand is incorrect."

The CESTAT also added-

"6.1 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 order is without any merit, the same was set aside and the appeals were allowed.

Winsome, In passing: An interesting fact associated with notification 30/2004-CE, dated 09.07.2004 needs mention. Notfn. 30/2004-CE carried a proviso when it was issued and which read – " Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the CENVAT Credit Rules, 2002,-".

A corrigendum came to be issued on the same day the notification was issued and which said - "for inputs or capital goods'' read "inputs''.

That apart, what happened to the rebate claims?

(See 2015-TIOL-233-CESTAT-DEL)