2018 (5) TMI 1205 – CESTAT HYDERABAD – TMI – CENVAT credit – it was found that the appellant had not reversed the CENVAT credit under Rule 6(3) on the exempted goods – What is the meaning of expression “which are exempt from the duties of customs” under rule 6(6)(vii) of CENVAT Credit Rules, 2004 – does it include only goods which are fully exempted or it also includes the goods which are partially exempted from the customs duty? – is the appellant required to reverse the credit as per Rule 6(3) of CENVAT credit Rules?
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Held that: – The harmonious interpretation of the expression “goods which are exempted from duties” with the remaining part of the scheme of CENVAT credit rules would require one to interpret as the goods which are fully exempted from duty. Hence, even 2.5% duty of customs will not make the goods “which are exempted from duty’ – the appellant is not exempted from reversing the credit as per Rule 6(3) of CENVAT Credit Rules.
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Whether the assessee has resorted
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. A/30567/2018 – Dated:- 17-5-2018 – Hon ble Mr. P.V. Subba Rao, Member (Technical) Shri V.S. Sridhar & Shri P. Venkata Prasad, CAs for the Appellant Shri B. Guna Ranjan, Superintendent /AR for the Respondent ORDER [ Order Per : P. Venkata Subba Rao ] 1. Appellant assessee are manufacturers of hydraulic/fluid couplings and they availed credit of duty paid on inputs/tax paid on input services under CENVAT Credit Rules (CCR), 2004. Their final goods are cleared both on payment of duty and without payment of duty to M/s NTPC Limited under an exemption notification. During audit by Central Excise authorities, it was found that the appellant had not reversed the CENVAT credit under Rule 6(3) on the exempted goods. It was pointed out and the appellant reversed an amount of ₹ 24,18,000/- which is 6% of the value of exempted goods and also paid interest applicable thereon. Thereafter, a show cause notice dated 29.09.2015 was issued to the appellants seeking to appropriate the aforesa
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11A(2) as they have reversed the credit and paid the interest, no show cause notice should have been issued against them. Hence, the SCN is not valid. ii) Rule 6(6) of CENVAT Credit Rules, 2004 reads as follows: (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 – (i) …………………; or (ii) ………………..; or (iii) ………………..; or (iv) ……………….;or (v) ………………..; or (vi) ………………..; or (vii) ………………..; or (viii) 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 sub-section (1) of Section 3 of the said Customs Tariff Act when imported into India and are supplied, – (a) Against International Competitive Bidding; or (b) To a power project from which power supply has been tied up through tariff based competi
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ion. 4. The extended period of limitation is not invokable as the appellant have not wilfully contravened any Rule with intent to avoid payment of duty and had, in fact, provided all relevant information in their returns for the relevant period. Hence, wilful suppression of facts and violation of any Act or Rules with the intent to avoid payment of duty cannot be invoked. 5. The appellants are under bonafide belief that they are eligible to the impugned credit in terms of Rule 6(6)(vii) and hence extended period of limitation cannot be invoked. Interest and penalty are not payable or imposable as CENVAT Credit itself is not liable to be reversed. 6. During the hearing, Ld. Consultant appeared on behalf of the appellant and strongly reiterated the above arguments. 7. Ld. DR, on the other hand, vehemently contested this position and argued that appellant is not entitled to CENVAT credit since he was not covered by the exemption under rule 6(6)(vii) inasmuch as similar goods if imported t
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per Rule 6(3) of CENVAT credit Rules? (ii) Has appellant resorted to fraud, wilful misstatement, suppression of facts or violated any provisions of the Act of the Rules with an intention to avoid payment of duty resulting in extended period of limitation? (iii) Is the appellant liable to pay interest and penalty? 9. I proceed to decide these issues. The words goods which are exempted are not defined in CENVAT Credit Rules 2004. However, the words exempted goods and exempted services are defined in the Rules. Both these expressions would mean that they are exempted on the whole of the duty or tax or chargeable to nil rate of duty. The expression exempted goods is used at several places in CENVAT Credit Rules, 2004 and in Rule 5(a) the words products which are exempted is used and in Rule 6(6)(viii) the expression goods which are exempted is used. I could not find any legal precedent in which this expression under rule 6(6)(vii) has been interpreted. It has been held by Hon ble Supreme
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are chargeable nil rate of duty, no CENVAT credit is admissible. This principle has been well established and the rates of duty on the inputs and final products are immaterial. Even if the rate of duty of final products is merely 1% the credit of duty paid on inputs is available. However, if the final products are exempted or chargeable to nil rate of duty, no credit is admissible. This has been made clear in Rule 6(1) of CENVAT credit Rules 2004. Provisions have been made under sub rules 2, 3 & 4 of Rule 6, to ensure that where some inputs are used for exempted goods while others are used for goods on which duty has been paid, credit is available only to the extent the imports are used in dutiable goods. The harmonious interpretation of the expression goods which are exempted from duties with the remaining part of the scheme of CENVAT credit rules would require one to interpret as the goods which are fully exempted from duty. Hence, even 2.5% duty of customs will not make the good
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r Rules, with an intent to avoid payment of duty. I find from the records presented during hearing that the assessee in fact had filed returns in ER-I in which under the head duty payable for clearance , they have declared that they have availed the benefit of notification No. 12/2012. Under the head details of CENVAT credit taken and utilised, they have shown the credit utilised for payment of amount in terms of Rule 6 of CENVAT credit Rules as zero. Thus, it is evident that the assessee had declared both the fact that they have availed the exemption notification and also that they have not reversed any CENVAT credit, in their ER-I returns filed with the department. I do not find that they have suppressed any facts or misstatement or violated any act of Rules with an intent to evade payment of duty. It appears that the Officer who scrutinised the returns, has not pointed out that they have not reversed the credit and only audit discovered and pointed it out. I, therefore, find that th
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