GUFIC BIO SCIENCE LIMITED VERSUS C.C.E. & S.T. Daman

Excise Appeal No.13777 of 2013

(Arising out of OIA-DMN-EXCUS-000-APP-158-13-14 dated 20.08.2013 passed by Commissioner of Central Excise, Customs and Service Tax-DAMAN( Appeal))

 

GUFIC BIO SCIENCE LIMITED

VERSUS

C.C.E. & S.T. Daman

 

APPEARANCE:

Shri Vinay Kansara, Advocate appeared for the Appellant Shri P. Ganesan, Superintendent (AR) for the Respondent

 

CORAM: HON’BLE MEMBER (TECHNICAL), MR. RAJU

 

 

RAJU

Final Order No. A/ 10357 /2023

DATE OF HEARING: 23.02.2023 DATE OF DECISION:23.02.2023

 

This appeal has been filed by Gufic Bio Science Limited against demand of reversal of cenvat credit taken on input used for manufacture of exempted goods which in turn were exported under bond.

2. Shri Vinay Kansara, Learned Counsel appearing on behalf of the appellant pointed out that the issue regarding admissibility of cenvat credit on inputs used for manufacture of exempted goods which in turn are exported under bond has been examined by Hon’ble High Court of Bombay in the case of Repro India Limited vs UOI 2009 (235) ELT 614 (Bom.).Relying on the said decision, the Tribunal in their own case vide order reported at 2017-TIOL-2362-CESTAT-AHM has granted the benefit to them for subsequent period. Learned counsel argued that relying on the aforesaid decision, the benefit should be granted to them as the facts are identical.
3. LearnedAuthorized Representative relies on the impugned 

 

4. I have considered the rival submissions. I find that Hon’ble High Court of Bombay in the case of Repro India Limited (supra) has observed has follows:

“7. We may also consider the provisions of Rule 6 of the Cenvat Credit Rules, 2004. The relevant portion of Rule 6(6)(v) reads as under :-

 

“(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)…….

 

• …..

 

• …..

 

• …..

 

• clearedfor export under bond in terms of provisions of the Central Excise Rules, 2002.”

 

The petitioners had manufactured both dutiable and exempted final product (packaged software and printed books respectively). The petitioner has taken credit on input used in the manufacture of dutiable as well as exempted final products. If the exempted products are exported outside India the provisions of Rule 6(6)(v) of the Cenvat Credit Rules are applicable. Therefore, the bar provided under Rule 6(1) and the liability created under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 are not attracted. By denying to the petitioner from exporting the printed books under bond what the respondents want to do is in fact to levy 10% on the sale price of the printed books in terms of Rule 6(3)(b) of the Cenvat Credit Rules, 2004. In our opinion this is wholly impermissible.

 

The provisions as now contained in Rule 6 of the Credit Rules, 2004 were contained in Rules 57C and 57CC of the Central Excise Rules, 1944 as they stood prior to 1st April, 2000. From 1st April, 2000 till 30th June, 2001 similar provisions were contained in Rule 57AD of the Central Excise Rules, 1944. In the context of these Rules circular dated 8th November, 2001 of the Ministry of Finance was issued. It dealt with the question whether 8% has to be paid on the sale price of exempted goods. Under Rule 6(3)(v) of Cenvat Credit Rules, 2004, to 8% has been increased to 10%. The relevant portion of the Circular dated 8th November, 2001 reads as under :-

 

“Further, it is now clearly and specifically mentioned in Rule 57AD(4) that the provisions relating to non-availability of Modvat credit and reversal @ 8% is not applicable in case the exempted goods are cleared for export under bond in terms of the provisions of Rule 13 .

 

In the new rule 57AD, it has been explicitly provided what was implicity in erstwhile rules 57C and 57CC. Further, the present rule 57AD(4) clearly goes on to show that the exempted goods are eligible to be exported under bond. To interpret otherwise will render the new rule 57AD(4) redundant.

 

In view of the foregoing in this case the provisions of sub-rule 57C(1) are satisfied as stipulated under Rule 57C(2) as well as Rule 57CC(6)1 and there was no need to comply with the provisions of rule 57CC1). Therefore, it is clear that an amount of 8% of the price of the goods exported is not required to be paid irrespective of whether the exported goods are exempted or otherwise.”

 

It would thus appear that the direction of the respondent No. 2 to the petitioners to pay 10% even though printed books were exported is not legally sustainable. It is only in the event the petitioners does not export the printed

 

goods and do not maintain the account as contemplated by rule 6(2) the petitioner would be required to pay 10% on the sale price of the printed books not so exported.

 

Even though Rule 6(1) of the Cenvat Credit Rules, 2004 provides that no Cenvat credit will be available in respect of the inputs used in the manufacture of exempted products, Rule 6(6)(v) of the Cenvat Credit Rules creates an exemption inter alia in respect of the excisable goods removed without payment of duty for export under bond in terms of Central Excise Rules, 2002. Considering the language of Rule 6(6)(v) of the Cenvat Credit Rules, 2004 the petitioners are entitled to avail Cenvat credit in respect of the inputs used in the manufacture of the final products being exported irrespective of the fact that the final products are otherwise exempt.

 

8. TheCenvat credit is allowed n (sic) the duty paid on inputs to mitigate the effect of double taxation of levying duty on inputs as also on the final  If, however, the exempted final product is exported it calls for a special relaxation/dispensation to make the goods of the country internationally competitive. As an illustration suppose a final product like tractor is otherwise exempted from excise duty even for domestic consumption and such tractors are exported. The various inputs like engines, etc., used in the tractor may have suffered excise duty. The intention is not to export taxes but only to export the goods. If the inputs like engine going into the manufacture of export commodity namely tractors are subject to excise duty, the Indian manufacturer of tractors becomes internationally uncompetitive. This appears to be the object behind the Government enacting special scheme to ensure that the duty is not levied even on inputs going to the export products. Rule 6(6)(v) has been consciously and expressly enacted with the specific objective to ensure that duty is not levied even on inputs going to the export products.

 

This method of adjustment, both from the point of Government and the assessee is to allow the assessee to take Cenvat credit on the inputs used in the export products and allow the assessee himself to adjust it for payment of duty on other products. If the adjustment is not possible, Cenvat credit is refunded in cash. This appears to be the Scheme of Rule 5 of the Cenvat Credit Rules, 2004. With a view to achieve this object, the Central Government has specifically enacted Rule 6(6)(v) of the Cenvat Credit Rules, 2004 to the effect that the bar created by Rule 6(1) will not apply for goods exported. Considering the conscious and express provisions contained in Rule 6(6)(v) for exported goods, to deny the permission to export under bond and/or to levy 10% on the value of the exported goods under Rule 6(3)(b) on the footing that the printed books exempt and, therefore, attract Rule 6(1) would be incorrect and completely nullify and frustrate Rule 6(6)(v).

 

9. Wemay also consider the various clauses of Rule 6(6) which would indicate that they relate to goods which are wholly exempt from  Rule 6(6)(i) relates to supply to SEZ. These are wholly exempted from duty vide Notification dated 19th October, 2001 and notification dated 22nd July, 2003. Rule 6(6)(ii) relates to supply of goods to Export Oriented Units. These are wholly exempt by Notification dated 31st March, 2003. Rule 6(6)(iii) relates to goods supplied to a unit located in Electronic Hardware Technology Park or Software Technology Park. Such supplies are exempt from duty by Notification dated 31st March, 2003. Rule 6(6)(iv) relates to supplies to United Nations or an international organisation for their official use. These are exempt by Notification No. 108/95. Rule 6(6)(v) relates to export under bond. Rule 6(6)(vi) relates to gold or silver arising during refining of copper. These are exempt from payment of duty by Notification No. 5/2006-C.E., dated 1st March, 2006. It would thus be clear that all the clauses of Rule 6(6) are enacted only to deal with the situation when the final products are exempt from payment of duty. If a final product is not exempted from duty, Rule 6(1) is not attracted at all and hence Rule 6(6) is unnecessary. Rule 6(6) is precisely needed only when the final products are exempt from payment of duty. In this context the Revenue itself has accepted that under the provisions of Cenvat Credit Rules, 2002 there were provisions for removal of exempted goods under bond but the same was not available with effect from 9th September, 2004 under Cenvat Credit Rules, 2004.

 

We may reproduce Rule 6(5) of the Cenvat Credit Rules, 2002 which reads as follows :-

 

“(5) The provisions of sub-rule (1), sub-rule (2), sub-rule (3) and sub-rule(4) shall not be applicable in case the exempted goods are either –

 

• clearedto a unit in a free trade zone; or

 

• clearedto a unit in a special economic zone; or

 

• cleared toa hundred per cent export oriented undertaking; or

 

• clearedto a unit in an Electronic Hardware Technology Park or Software Technology Park; or

 

• supplied to the United Nations or an international organizationfor their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue)  108/95-CentraI Excise, dated the 28th August, 1995, number GSR 602(E) dated the 28th August, 1995; or

 

• clearedfor export under bond in terms of the provisions of the Central Excise Rules, ”

 

We may reproduce Rule 6(6) of the Cenvat Credit Rules, 2002, which read as under :-

 

“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 –

 

• clearedto a unit in a special economic zone; or

 

• cleared toa hundred per cent export oriented undertaking; or

 

• clearedto a unit in an Electronic Hardware Technology Park or Software Technology Park; or

 

• supplied to the United Nations or an international organizationfor their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue)  108/95-Central Excise, dated the 28th August, 1995 number G.S.R. 602(E) dated the 28th August, 1995; or

 

• cleared for export under the items of the provisions of the Central Excise Rules, 2002; or

 

• gold or silver falling within Chapter 71 of the said First Schedule,arising in the course of manufacture of copper or zinc by smelting.”

 

A perusal of the aforesaid Rules would clearly show that sub-rule (i) to (vi) are identical and the difference in Rule 6(6) of the Cenvat Credit Rules, 2004 and Rule 6(5) of the Cenvat Credit Rules, 2002 is not relevant for the purpose of the present case. Rule 6(1), 6(2), 6(3) and 6(4) of the Cenvat Credit Rules under Cenvat Credit Rules, 2002 as well as under the Cenvat Credit Rules, 2004 remains the same. As noted earlier the object and purpose of Rule 6(6) of Cenvat Credit Rules, 2004 is to promote the policy of the Government that the benefit of duty paid on input is available as credit in respect of certain exempted goods as well as the exempted goods exported under bond. The minor change in the wordings of Rule 6(6) of the Cenvat Credit Rules, 2004 by using the term “excisable goods” instead of exempted goods is that the term „exempted goods‟ may not cover the dutiable goods which are exported under bond. Therefore, in order to widen and cover both dutiable and exempted goods exported under bond, Rule 6(6) of Cenvat Credit Rules, 2004 uses the expression “excisable goods”. As an illustration, if a car which is dutiable is exported under bond without payment of duty there may be doubt as to whether credit on the inputs will be available, since the car is cleared without payment of duty under Rule 6(5) of Cenvat Credit Rules, 2002. It could be argued that it covers only the

 

exempted goods exported and not dutiable goods exported. In order to cover such a situation also, Rule 6(6) of Cenvat Credit Rules, 2004 used the expression

„excisable goods‟ which is wider to include both dutiable as well as exempted goods.”

 

5. I find that relying on the aforesaid decision and decision of Tribunal in appellant’s own case has granted the benefit as reported in 2017- TIOL-2362-CESTAT-AHM.Relying on the aforesaid decision, I find no merit in the impugned order. The same is set aside. Appeal is allowed.

(Dictated & Pronounced in the open court)

 

 

 

 

 

 

 

Neha

(RAJU) MEMBER (TECHNICAL)