By TIOL News Service

MUMBAI, OCT 10, 2017: THIS is a Revenue appeal.

The fact of the case is that the respondent supplied the goods without payment of duty under Notification 34/2006-CE dated 14.06.2006. The buyer of the goods is holding SFIS certificate and the duty payable by the respondent has been debited by the buyer in their SFIS certificate.

The case of the Department is that since the goods were cleared under Notification 34/2006-CE without payment of duty they are liable to pay 10% of the value of the exempted goods in terms of Rule 6 of CCR, 2004.

The adjudicating authority confirmed the demand but the Commissioner (Appeals) allowed the appeal considering para 3.6.4.10 of Foreign Trade Policy, 2004-09 according to which the holder of the SFIS certificate is allowed to pay duty from the duty credit scrip under SFIS. Inasmuch he held that the goods supplied were not exempted goods and hence rule 6 of CCR, 2004 does not come into picture.

As mentioned, Revenue is before the CESTAT and argues that there is no exception provided in respect of Notification No. 34/2006-CE which is an exemption notification and, therefore, the demand in terms of rule 6 of CCR, 2004 is justified. Reliance is placed on the decisions in Mohan Breweries & Distilleries Ltd. - 2015-TIOL-2231-HC-MAD-CX and Essar Steel Ltd. - 2004-TIOL-807-CESTAT-DEL-LB

The respondent placed reliance on the decision in Voltamp Transformers Ltd - 2011-TIOL-1708-CESTAT-AHM covering identical issue and the dismissal of the Revenue Tax Appeal no. 288 of 2012 filed against this order of the Tribunal, on 25 June 2012 by the Gujarat High Court.

The Bench observed -

"5. I find that there is no dispute on the fact that the respondent has cleared the goods under Notification No. 34/2006-CE which was issued under SFIS Scheme according to which the manufacturer is allowed to clear the goods without payment of duty and the duty payable on such goods is debited from the SFIS Scrip by the recipient of the goods. In this position it cannot be said that the goods cleared by the respondent is exempted. This gets clear from paragraph 3.6.4.10 of the Foreign Trade Policy which reads as below:

"Utilisation of duty credit scrip shall be permitted for payment of excise duty in terms of DOR notification issued for procurement from the domestic sources as items permitted under para 3.6.4.5"

5.1 As per this para 3.6.4.5 of Foreign Trade Policy, the goods supplied by the respondent is not exempted as duty was admittedly debited by the recipient of the goods…."

Noting that the very same issue has been considered by the Gujarat High Court (supra) and the decisions cited by the AR were distinguishable, the CESTAT concluded that the goods supplied under Notification 34/2006-CE are not exempted and accordingly Rule 6(3)(b) of CCR, 2004 is not applicable.

The impugned order was upheld and the Revenue appeal was dismissed.

(See 2017-TIOL-3642-CESTAT-MUM)