TMI Blog2011 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... e of dutiable final products is allowable, provided separate accounts regarding the receipt, consumption and inventory of the input used in the manufacture of dutiable final product are maintained The assessee was entitled to avail the Cenvat credit of duty paid on menthol used in the manufacture of exempted menthol crystals and utilize the said credit for payment of duty on clearance of peppermint oil either for home consumption or for export. In the present case, since the peppermint oil has been exported on payment of duty, the assessee was entitled to claim rebate of the duty paid on peppermint oil - Decided in the favour of the assessee - 1850 OF 2011 - - - Dated:- 6-4-2011 - J.P. DEVADHAR, MRS. R.S. DALVI, JJ. Mr. Pradeep Jetly for the petitioner. Mr.V.Sridharan with Mr.Prakash Shah and Mr.Sanjay Agarwal, Advocates for the respondents. JUDGMENT (PER J.P. DEVEDHAR, J.) 1) This petition is filed by the Commissioner of Central Excise, Raigad to challenge the order passed by the Joint Secretary to the Government of India on 21/1/2011 whereby the stay application filed by the Commissioner of Central Excise seeking stay of the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal products namely, menthol crystals and peppermint oil. 5) By a Notification No.4/2008-C.E. dated 1/3/2008 excise duty on menthol crystals was exempted. However, levy of excise duty on peppermint oil continued. Thus, with effect from 1/3/2008 menthol crystals were liable to be cleared without payment of duty, whereas, peppermint oil was liable to be cleared on payment of duty. 6) In the present case, it is not in dispute that even after 1/3/2008 the entire quantity of menthol crystals and peppermint oil manufactured by the assessee have been exported and domestic clearances have not been made. The assessee has cleared menthol crystals for export under bond without payment of excise duty and cleared peppermint oil for export on payment of excise duty by debiting the input credit availed on menthol used in the manufacture of final products. Since rebate of duty paid on exported goods is allowable under Rule 18 of the Central Excise Rules 2002, the assessee applied for rebate of duty paid on export of peppermint oil. 7) The Commissioner of Central Excise, New Delhi under whose jurisdiction the peppermint oil was manufactured and exported by a unit of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time before the Maritime Commissionerate, Raigad were initially allowed and rebate amount of Rs.45,68,70,421/- and Rs.37,51,698/- were sanctioned and paid to the assessee vide two orders in original dated 1/9/2009 and 22/9/2009 respectively, but without allowing interest claimed by the assessee under Section 11BB of the Central Excise Act, 1944. However, subsequent rebate claims filed by the assessee seeking rebate of Rs.29,59,27,180/-, Rs.4,40,35,201/- and Rs.1,16,77,065/- respectively were rejected by the Commissioner, Raigad by three orders in original all dated 30/4/2010 on the ground that rebate claim was not allowable. 10) Challenging the orders in original dated 1/9/2009 and 22/9/2009 whereby the rebate claim was allowed, the revenue filed appeals before Commissioner (A). Similarly, challenging the three orders in original all dated 30/4/2010 whereby rebate claim was rejected, the assessee filed appeals before Commissioner (A). 11) By a common order dated 14/09/2010, the Commissioner (A) dismissed the appeals filed by the revenue and allowed the appeals filed by the assessee. As a result whereof the assessee became entitled to receive the rebate amount of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4)----------- (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9. (6) The amount paid under [sub-rule (5) and sub-rule (5A)] shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under [sub-rule (5) and sub-rule (5A)]" Rule 5 Refund of CENVAT credit - Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) duty of excise on any final product cleared for home consumption or for expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified to sub-rule (3A). Explanation I. - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case maybe, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II. - For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely :- (4) ---- (5)---- (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) to (iva) ----- or (v) cleared for export under bond in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Rule 5 of 2004 Rules. Since duty paid on exported goods is allowable as rebate, the assessee is entitled to claim the rebate of such duty. 17) Relying on a decision of this Court in the case of Repro India Ltd. V/s. Union of India reported in (2009) 235 ELT 614 (Bom) which is followed by various other High Courts, Mr. Sridharan submitted where duty paid inputs are used in the manufacture of dutiable final products as well as exempted final products and if both the final products are exported, then Rule 6(1) to to 6(4) would not apply and, therefore,the argument of the revenue that in such a case, the input credit lapses cannot be sustained. Accordingly, counsel for the assessee submitted that the order of the Commissioner of Central Excise (A) be upheld and the rebate claim be allowed to the assessee. 18) We have carefully considered the rival submissions. 19) Undisputed facts in the present case are that the duty paid menthol is used in the manufacture of menthol crystals and peppermint oil emerges as a by product and both these final products were liable for excise duty under the Central Excise Act, 1944. By a Notification No. 4/2008 dated 1/3/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used in the manufacture of dutiable final products is allowable, provided separate accounts regarding the receipt, consumption and inventory of the input used in the manufacture of dutiable final product are maintained. However, Rule 6(6) of 2004 Rules provides that the provisions contained in Rule 6(1) to 6(4) of 2004 Rules shall not apply in certain specified cases, where the excisable goods are cleared without payment of duty. Clause (v) of Rule 6(6) of the 2004 Rules provides that where the exempted goods are cleared for export without payment of duty under Central Excise Rules, 2002, then the provisions contained in Rule 6(1) to 6(4) of 2004 Rules shall not apply. Thus, Rule 6(6) of 2004 Rules carves out an exception to the applicability of the provisions contained in Rule 6(1) to 6(4) in certain specified cases. 23) In the present case, admittedly, the exempted menthol crystals have been cleared for exports under bond without payment of duty and, therefore, the case of the assessee would be covered under Rule 6(6)(v) of 2004 Rules and consequently Rule 6(1) to 6(4) of 2004 Rules would not be applicable to the facts of the present case. In other words, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under bond. In the present case, exempted menthol crystals has been exported without payment of duty under bond and, therefore, the assessee was entitled to take the credit of duty paid on menthol used in the manufacture of exempted menthol and utilize that credit for paying duty on clearance of peppermint oil. Since peppermint oil was exported on payment of duty, the assessee was entitled to claim rebate of duty paid on exported peppermint oil under Rule 18 of the Central Excise Rules, 2002. 28) In the result, we hold that in the facts of the present case, since the exempted menthol crystals as well as dutiable peppermint oil manufactured out of duty paid menthol have been exported by the assessee, the provisions of Rule 6(1) to 6(4) of the 2004 Rules are not applicable and as per Rule 5 of 2004 Rules, the assessee was entitled to avail the Cenvat credit of duty paid on menthol used in the manufacture of exempted menthol crystals and utilize the said credit for payment of duty on clearance of peppermint oil either for home consumption or for export. In the present case, since the peppermint oil has been exported on payment of duty, the assessee was entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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