2023 (12) TMI 113 - AT - Central Excise

Reversal of CENVAT Credit - Menthol Crystals which was exempted vide notification 4/2008-CE dated 01.03.2008 while DMO remained chargeable to duty - HELD THAT - The issue is no more res integra and is squarely covered by the judgment of Hon ble High Court of Himachal Pradesh at Shimla in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DRISH SHOES LTD. 2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT where it was held that we hold that an assessee manufacturing goods chargeable to nil duty is eligible to avail CENVAT credit paid on the inputs under the exception clause to Rule 6(1) as contained in Rule 6(5) of CENVAT Credit Rules 2002 and Rule 6(6) of CENVAT Credit Rules 2004 used in the manufacture of such goods if the goods are exported. By respectfully following the ratio as laid down by Hon ble High Court of Himachal Pradesh at Shimla and also observing that the appeal filed by the Revenue against the decision of the Hon ble High Court has been dismissed by Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE CHANDIGARH VERSUS M/S DRISH SHOES LTD. 2016 (7) TMI 1415 - SC ORDER the impugned order is set aside. The Appeal filed by the Appellant is allowed.

Summary

Issues:
The judgment involves issues related to demand for reversal of Cenvat credit on Menthol Crystals exempted under a notification, applicability of Rule 6 of the CENVAT Credit Rules, 2004, and whether the benefit of Rule 6(6) can be extended on export goods.

Summary:
The Appellant, a manufacturer of Menthol/Menthol Crystals & DMO, faced a demand for reversal of Cenvat credit on Menthol Crystals exempted under a notification, while DMO remained chargeable to duty. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals) in the first round of litigation. However, the Tribunal in an earlier order held that Rule 11(3) was not applicable in this case. Regarding Rule 6, the Tribunal stated that if fully exempted excisable goods are exported under bond, Cenvat credit would not be liable to be reversed. The matter was remanded for ascertainment of exports.

In the subsequent round of adjudication, the Additional Commissioner contended that since the goods claimed as exported were not against LUT or bond, the benefit of Rule 6(6) could not be extended on export goods. The demand was confirmed again, but the penalty was set aside. The Appellant then filed a fresh defense stating that a portion of the disputed quantity was cleared for home consumption, while the rest was exported. The Additional Commissioner again confirmed the demand and imposed a penalty, which was set aside by the Commissioner (Appeals).

The Appellant argued that the exported goods were cleared under ARE-1, indicating they were exported under Bond/LUT. Cenvat credit was not required to be reversed for exempted finished goods exported under bond/LUTs, as per settled law. The Appellant cited several judgments in support of this argument.

After considering the arguments and perusing the records, the Tribunal found that the issue was covered by a judgment of the High Court of Himachal Pradesh, which held that an assessee manufacturing goods chargeable to nil duty could avail Cenvat credit on inputs used in the manufacture of such goods if they were exported. The Tribunal set aside the impugned order and allowed the appeal filed by the Appellant with consequential relief as per law.