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M/s Osaka Alloys and Steels Pvt. Ltd. Versus CCE & ST, Jammu & Kashmir

2015 (4) TMI 852 - CESTAT NEW DELHI

Area based exemption in Jammu and Kashmir - application for fixation of special rate of value addition - alue addition of 36% specified in the exemption notification - Benefit of Notification No. 56/02-CE as amended by Notifications No. 19/08-CE dated 27/3/08 and 34/08-CE dated 10/6/08 - Held that:- Jammu & Kashmir High Court in its judgment in the case of M/s Reckitt Benckiser [2010 (12) TMI 237 - JAMMU AND KASHMIR HIGH COURT] has quashed the amendments to the Notification No. 56/02-CE by Notif .....

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dated 10/6/08. Thus those assessees who have set up their units in the areas specified under Notification No. 56/02-CE on or after 06/2/10, have option either to avail Notification No. 56/02-CE or avail the Notification No. 1/2010-CE dated 06/2/10 and in case they opt for Notification No. 56/02-CE, the benefit available to them would not be restricted by Notification No. 19/08-CE dated 27/3/08 and 34/08-CE dated 10/6/08.

If the appellant, however, opt for the Notification No. 1/2010 .....

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5,11,690/-) and cost of raw material and packing material consumed (Rs. 32,30,184/-) - appellant s plea that the cost of raw material and packing material consumed is nil is not correct and the Commissioner has correctly determined the value addition for 2012-13 as 69.27%. If for 2013-14 the appellant opt for Notification 1/2010-CE and also opt for special rate of value addition, the same must be determined in terms of the above formula. - Matter remanded back - Decided in favour of assessee. - .....

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e II, Samba, Jammu & Kashmir, manufacture Lead Ingots chargeable to Central Excise Duty under Chapter 78 of the Central Excise Tariff Act, 1985. They commenced commercial production on 27/3/12. Notification No. 56/02-CE dated 14/11/02 issued under Section 5A (1) of Central Excise Act, 1944 readwith Section 3 (3) of Additional Duty of Excise (Goods of Special Importance Act) 1957, and Section 3 (3) of Additional Duty of Excise (Textile and Textile Articles) Act, 1978 exempts the goods other t .....

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lable at the end of the month for payment of duty to the extent possible. This exemption notification was, however, applicable to the eligible goods manufactured and cleared from the units located in the areas specified in Annexure II of the exemption Notification. This notification was applicable to the new industrial units which commenced commercial production on or after 14th June, 2002 and also to the industrial units existing before 14th June, 2002 which had undertaken substantial expansion .....

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exemption notification in the official gazette or from the date of commencement of commercial production, whichever is later. In this notification, there is no sun set provision. As per the conditions of this notification, a manufacturer eligible for this exemption notification who has opted for the same, is required to pay duty payable for a particular month, first by utilising to the extent possible the Cenvat credit available to him at the end of the month and only after payment of duty to t .....

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PLA or he can take self-credit of the duty refundable in his PLA and inform the Jurisdictional Assistant Commissioner for ex-post facto approval. Another feature of this notification is that while the manufacturer eligible for this exemption gets refund of the duty paid through PLA in the manner prescribed in this notification, his customer buying the goods from him and using the same as input for use in the manufacture of some other final products, would in accordance with the provisions of Rul .....

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ption notification was amended by Central Government by Notification No. 19/08-CE dated 27/3/08 and Notification No. 34/08-CE dated 10/6/08. In terms of these amendments the exemption was restricted to the duty of excise or AED (GSI)/AED (T&TA) payable on the value addition undertaken in the manufacture of the eligible goods or the duty paid through PLA in respect of the goods cleared during a month after payment of duty to the extent possible by utilising Cenvat credit available at the end .....

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at the rate as prescribed in this notification. However, the amended notification also had a provision that a manufacturer availing of this exemption will have option not to avail the rates of value addition as specified in this notification and apply to the Jurisdictional Commissioner of Central Excise for a higher value addition if he proves that his actual value addition is at least 115% of the rate specified in the notification. The actual value addition was to be calculated in terms of expl .....

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dated 27/3/08 and Notification No. 34/08-CE dated 10/6/08 in this regard the last para of the judgement is reproduced below :- In view of the above detailed discussion, I need not enter into this arena as the writ petitions are being disposed of without addressing this controversy. For the reasons mentioned above, these petitions are allowed. Impugned Notifications bearing Nos. 19/2008-CE dated 27th of March 2008 and 34/2008-CE dated 10th of June, 2008, shall stand quashed. The petitioner-units .....

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d another exemption Notification No. 1/2010-CE dated 06/2/10. This notification also exempted the goods other than the goods mentioned in the Annexure I to the Notification from the duty of excise eligible under Section 3 of Central Excise Act, 1944 and also from AED (GSI) and AED (T&TA) to the extent these duties have been paid on the value addition in the manufacture of the goods, at the rates specified in this notification or the duty on the goods cleared during a month paid through PLA a .....

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sting before 06/2/10 which had either undertaken substantial expansion of installed capacity by not less than 25% on or after 06/2/10 or have made new investment on or after 06/2/10 and such new investment has resulted in generation of additional regular employment of not less than 25% over and above the base employment limit, subject to the conditions mentioned in the notification. This exemption notification also had a provision that a manufacturer availing of this exemption may opt not to ava .....

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equired to pay the duty to the extent possible through Cenvat credit available at the end of the month and only the duty payable through PLA was refundable subject to the cap of the duty payable on the value addition at the rate specified in this exemption notification or, as the case may be, at the special rate of value addition fixed by the Commissioner on the application of the manufacturer or the duty paid through PLA, whichever is less. Exemption Notification dated 06/2/10 was also availabl .....

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ion for 2012-13. Thereafter, the appellant issued a reminder dated 16/4/12 to the Commissioner and in this regard by another letter dated 17/5/12 the appellant provided certain details in support of their claim for higher value addition for 2012-13. The Commissioner vide order-in-original dated 31/5/12 fixed the value addition as 69.27% for 2012-2013. The appeal No. E/2884/2012-EX (DB) has been filed against order dated 31/5/12 of the Commissioner challenging the percentage of value addition fix .....

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Tribunal. Since, there was no response from the appellant, the Commissioner vide order-in-original dated 01/4/14 rejected their application for fixation of special rate of value addition for 2013-14 and accordingly the assessee for the financial year 2013-14 have to avail the value addition of 36% specified in the exemption notification. Against this order of the Commissioner, appeal No. E/54271/14 EX (DB) has been filed. In this appeal the appellant have also claimed to be eligible for Notifica .....

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s located in the area specified under Notification No. 56/02-CE, that just because by mistake the appellant wrote to the Jurisdictional Commissioner, Central Excise for fixation of special rate of value addition under Notification No. 1/10-CE, they cannot be denied the benefit of Notification No. 56/02-CE, that though the amending Notification No. 19/08-CE dated 27/3/08 and 34/08-CE dated 10/6/08 restricted the benefit of exemption Notification No. 56/02-CE only to the duty paid on the value add .....

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Notification No. 19/08-CE dated 27/3/08 and 34/08-CE dated 10/6/08, that in view of this, an assessee manufacturing the goods covered by Notification No. 56/02-CE in the factory located in the areas specified in this notification, is eligible for exemption of 100% of the duty paid through PLA in the manner specified in this notification and the benefit is not restricted to the duty on the value addition at the rate specified in this notification or at the special rate fixed by the Commissioner, .....

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in 2007 (209) E.L.T. 321 (S.C.), wherein the Apex court has held that even if an assessee does not claim the benefit under a particular notification at initial stage, he is not debarred, prohibited or estoppels from claiming such benefit at a later stage and that in view of this, the impugned orders denying the benefit of 100% exemption of the duty paid through PLA in the manner specified in the Notification is not correct. 4. Shri R.K. Grover and Shri M.S. Negi, the learned DRs, defended the i .....

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tt Benckiser vs. Union of India (supra) as that judgment is applicable only to those assessees who had set up the manufacturing unit in the specified areas during the period prior to the 27/3/08, while this is not so in this case, that since in this case the appellant had commenced commercial production in March 2012 and had opted for Notification No. 1/2010-CE dated 06/2/10 by requesting the Jurisdictional Commissioner to fix special rate of value addition, they have to abide by the Commissione .....

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y this exemption notification and manufactured in the areas specified in this notification from the Central Excise duty leviable under Section 3 (1) of Central Excise Act, 1944 and the AED (GSI) and AED (T&TA) leviable on the goods to the extent the duty on the goods cleared during a month is paid by the assessee through PLA after payment of duty to the extent possible through Cenvat credit available at the end of the month. Thus, the exemption benefit available to an assessee in terms of th .....

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the Jurisdictional Assistant Commissioner. Another feature of this exemption scheme is that while the assessee manufacturing the goods eligible for this exemption in the factory located in the areas specified in this notification cleared the goods by availing of this exemption, his customers even if located outside the exempted areas, were, in terms of Rule 12 of the Cenvat Credit Rules, 2004, eligible for Cenvat credit of full duty, as if no duty exemption was availed in respect of the goods 7 .....

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uty payable on the value addition at the rate specified in this notification or at the special rate fixed by the Commissioner on the assessee s request or the duty paid through PLA in the manner specified in this notification, whichever is lower. This amendment was challenged by filing a writ-petition No. 470/2008 before Hon ble Jammu & Kashmir High Court by M/s Reckitt Benckiser. However, before this writ-petition could be decided by Hon ble High Court, the Central Government issued a new N .....

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t the rates specified in the notification or the special rates fixed by the Commissioner on the assessee s request or the duty paid through PLA in respect of the clearances made during a month after utilising to the extent possible the Cenvat credit available at the end of the month, whichever is lower. However, after issue of this notification, Hon ble Jammu & Kashmir High Court vide its judgment dated 23/12/10 in respect of the writ-petition filed by M/s Reckitt Benckiser quashed the amend .....

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month through PLA after utilising to the extent possible the Cenvat credit available at the end of the month for payment of duty, without the cap which had been specified under Notification No. 19/06-CE and 34/08-CE. The other exemption Notification No. 1/10-CE dated 06/2/10 applicable to the same goods but manufactured and cleared from any manufacturing unit in the State of Jammu & Kashmir exempted the specified duties to the extent of payment of duty through PLA in the manner specified in .....

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02-CE has option either to avail of the exemption Notification No. 56/02-CE or avail of Notification No. 1/2010-CE. 8. In this case, the appellant had commenced production sometime in March 2012 and had initially written to the Commissioner for fixing of the special rate of value addition under Notification No. 1/2010-CE and the Commissioner vide order dated 31/5/12 had fixed the rate of value addition as 69.27% for 2012-13. The appellant, however, had sought exemption of 100% of the duty paid t .....

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result of which they have to avail general rate of 36% of the value addition specified in the notification. Against this order dated 01/4/14 the second appeal has been filed. In respect of the both the appeals, the appellant s plea is that since their unit is located in the area specified under Notification No. 56/02-CE and since they, by mistake, had applied to the Commissioner for fixing special rate under Notification No. 1/2010-CE and since Notification No. 56/02-CE is more beneficial to the .....

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claiming such benefit at a later stage. The plea of the learned DR, however, is that the judgment of Hon ble Jammu & Kashmir High Court in the case of M/s Reckitt Benckiser vs. Union of India (supra) is in respect of writ-petition filed by M/s Reckitt Benckiser and this judgment would not be applicable to the appellant, as while M/s Reckitt Benckiser had set up their unit before 27/3/08 and, therefore, on the basis of the principle of promissory estoppels Hon ble High Court held that the ben .....

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and 34/08-CE dated 10/6/08 and the effect of the judgment would be that the provisions restricting the benefit introduced in the Notification No. 56/02-CE by these notifications are no longer there. Therefore, in our view, this judgment of Hon ble Jammu & Kashmir High Court would be applicable to those assessees also who had opted for this exemption even after the amendment to the Notification No. 56/02-CE by Notification No. 19/08-CE dated 27/3/08 and 34/08-CE dated 10/6/08. Thus those asse .....

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u & Kashmir other than those specified under Notification No. 56/02-CE, have no option but to avail the Notification No. 1/2010-CE and the benefit available to them would be restricted by the provisions of this exemption notification and in their case the judgment of Hon ble Jammu & Kashmir High Court in the case of M/s Reckitt Benckiser vs. Union of India (supra) would not be applicable. 9. In this case, if unit of the appellant is located in the area specified the Notification No. 56/0 .....

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calculated on the basis of the formula prescribed in the Explanation to para 5 of the notification. In this regard, we do not find any mistake in para 17 of the order-in-original dated 31/5/12 passed by the Commissioner as the value addition has been determined as the difference between the sale value excluding excise, sales tax and other indirect taxes during 2011-12 (Rs. 1,05,11,690/-) and cost of raw material and packing material consumed (Rs. 32,30,184/-). Accordingly, the percentage of valu .....

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