2005 (3) TMI 13 - Commissioner - Central Excise

Central Excise Assessee have option to pay duty on fully exempted export final goods or they can take credit of duty paid on inputs used in manufacture of final products Accumulated credit of export goods is allowable

Summary

Issues Involved:
1. Whether an assessee has the option to pay duty on exempted export final products on their own volition.
2. Whether the benefit of Cenvat credit of duty paid on inputs used in the manufacture of exempted final products can be availed.
3. Legality of the Department's reliance on Board's Circular dated 4-1-91.

Issue-wise Detailed Analysis:

1. Option to Pay Duty on Exempted Export Final Products:
The respondents were engaged in manufacturing household articles and availing Cenvat credit on duty-paid inputs. Their products were exempted from excise duty under Notification No. 10/2003-C.E. However, they paid duty on these exempted products and claimed rebates. The Department issued show cause notices proposing rejection of these rebate claims, arguing that the duty paid was not authorized by law. The Assistant Commissioner sanctioned the rebate claims, citing Tribunal decisions that allowed manufacturers to choose between exemption notifications and Modvat Scheme benefits. The Tribunal in cases like Hindustan Seals Ltd. and Nirma Chemicals Works Ltd. supported the view that manufacturers have the option to pay duty on exempted products and utilize input credit for payment of such duty.

2. Availment of Cenvat Credit:
The Department appealed, arguing that the products were exempted from duty and Cenvat credit should not be allowed for inputs used in exempted goods. They relied on Circular No. 2/91-CX-3, which stated that an assessee cannot pay duty voluntarily on fully exempted goods. The respondents countered with various Tribunal judgments that upheld the option to pay duty on exempted goods and avail Cenvat credit. The Tribunal in Everest Converters held that exemption notifications cannot be forced upon an assessee and if an assessee does not claim the benefit of an exemption notification, the goods would be assessable at the tariff rate. This view was supported by several other Tribunal decisions and the Supreme Court in Narayan Polyplast.

3. Legality of Department's Reliance on Circular:
The respondents argued that the Board's Circular dated 4-1-91 was contrary to the legal provisions as established by various Tribunal judgments. The Tribunal in cases like Videocon International Ltd. held that Departmental circulars contrary to correct legal interpretation are not binding on judicial authorities. The adjudicating authority upheld the respondents' option to pay duty on exempted goods and avail Cenvat credit, rejecting the Department's appeals. The decision was based on the settled legal position that an assessee has the option to choose between exemption and paying duty, supported by multiple Tribunal and Supreme Court judgments.

Conclusion:
The judgment upheld the respondents' right to pay duty on exempted export goods and avail Cenvat credit, rejecting the Department's appeals. The decision was consistent with established legal principles and supported by various Tribunal and Supreme Court rulings. The Orders-in-Original were sustained, and the rebate claims were deemed admissible under Rule 5 of the Cenvat Credit Rules, 2002.