TMI Blog2015 (9) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... condition, then, it is not possible to accept the arguments of Mr. Sridharan that the exemption is not absolute but conditional. Once we have taken the above view, then, it is not necessary to refer to other judgments relied upon by Mr. Sridharan with regard to interpretation of exemption notifications. It is only when the exemption claimed is conditional or that two views are possible on a reading of the exemption notification that these judgments can have any application. These judgments also, therefore, do not assist the assessees-appellants. Writ petitions failed - That bifurcation made by the Tribunal is in clear terms traceable to the above Rules. Hence, the Tribunal’s order confirming the demand partially does not require any interference. The grounds which have been taken in these Writ Petitions and the Central Excise Appeals are based on the option to pay duty on the tractor parts consumed within the factory of production for manufacture of tractors exported under bond. However, that option itself is not available in view of the language of Section 5A(1A) and the Cenvat Credit Rules. In these circumstances, we do not find any fault in the orders passed by the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs 8708, 8409 and 8483 of the First Schedule to the Central Excise Tariff Act, 1985. These parts of tractors are partly consumed within the factory and partly cleared outside the factory. With effect from 9th July, 2004, tractors falling under Heading 8701 of the First Schedule to the Central Excise Tariff Act, 1985 are fully exempt from basic Excise duty leviable thereon, in terms of Sl. No. 295 of Notification No. 6/2002-C.E., dated 1st March, 2002 (as amended by Notification No. 23/2004-C.E., dated 9th July, 2004). This exemption from basic Excise duty to tractors falling under Heading 8701 has been continued vide Sr. No. 40 of Notification No. 6/2006-C.E., dated 1st March, 2006. Annexure-B is a copy of said Notification. 4. The parts of tractors are exempt vide Sr. No. 92 of Notification No. 6/2006-C.E., dated 1st March, 2006 when they are consumed within the factory of production. Thus, the tractors parts cleared outside the factory are liable to duty. 5. Tractors cleared for home consumption also attract industrial cess @ 1/8% ad valorem in view of Order No. S.O. 869(E), dated 12th November, 1993 issued by the Ministry of Industry (Department of Heavy Industry), Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax and other taxes, if any paid on tractors, at the time of clearances, after availing Cenvat credit on all the inputs. Annexure-D is a copy of letter dated 21st July, 2004. 8. The Deputy Commissioner vide letter dated 27th July, 2004 informed the appellants that they are required to follow the procedure laid down under Rule 6 of the Cenvat Credit Rules, 2002. Annexure-E is a copy of the said letter. 9. The appellants vide their letter dated 31st July, 2004 addressed to the Commissioner of Central Excise, Mumbai-V and copy endorsed to the Deputy Commissioner of Central Excise, Malad Division, gave a detailed note on the applicability of Rule 6(3)(b) and Rule 6(5)(vi) of the Cenvat Credit Rules in respect of the manufacture and clearance of tractors for home consumption as well as for export. Annexure-F is a copy of said letter. 10. Further, on 4th August, 2004, the appellants wrote a letter to the Commissioner of Central Excise, with a copy endorsed to the Deputy Commissioner of Central Excise, Malad Division, requesting the department to approve the following method proposed to be adopted by them : (a) The appellants would be availing the Cenvat credit on all input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... envat Credit Rules, 2004 with effect from 1st February, 2007 and upto 30th June, 2007 has been set out. It is submitted that with effect from 1st February, 2007 the appellants stopped paying duty on all aggregates used in the manufacture of tractors and also did not take credit on inputs which are exclusively used in the manufacture of tractors cleared for home consumption. However, on the inputs used in the manufacture of tractors cleared for export under bond or undertaking in terms of Rule 19 of the Central Excise Rules, credit was taken under the Cenvat Credit Rules, 2004. The manner of availment of such credit has been set out in para 16.3. It is, then, stated that whenever the tractors were cleared for home consumption the appellants were paying an amount equal to ten per cent of the sale price of the exempted tractors cleared for home consumption in terms of Rule 6(3)(b) of the Cenvat Credit Rules, after deducting the said amount payable under Rule 6(3)(b). The appellants vide their letter dated 31st January, 2007 informed the jurisdictional Assistant Commissioner of Central Excise that with effect from 1st February, 2007 the appellants will be exporting the tractors under b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of credit under the Cenvat Credit Rules, 2004 with effect from 1st July, 2007. The Assistant Commissioner of Central Excise by a letter dated 28th June, 2007 directed the appellants to explain the legal basis for this procedure and the explanation was given by the letter dated 2nd July, 2007. Copies of these letters are marked Annexure N and Annexure O to this memo of appeal. 19. The details of duty paid on the aggregates and the credit taken on the inputs used in the manufacture of tractors cleared for export has been set out in two letters, copies of which are annexed as Annexure- P and Q . The position after 1st July, 2007 has been set out from para 23 onwards and then there is a reference made in para 26.1 to the show cause notices, details of which are as under : Sr. No. Show cause notice No. Date Period of dispute Amount involved - Rs. 1(a) F. No. V Adj. (Ch. 84, 87) 15-15/M-02/2008/116, dated 26-2-2008 Feb. 07 to June 07 4,55,99,931/- 10,52,45,486/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er bond was confirmed and equally penalty of ₹ 1,00,00,000/- was imposed. 23. Aggrieved by such orders, this appeal has been filed. There is a connected Writ Petition. Their facts are that the petitioners are, inter alia, engaged in the manufacture of tractors which are exempt from whole of the basic Excise duty leviable thereon under Section 3 of the Central Excise Act, 1944 with effect from 9th July, 2004. However, the tractors attract cess (Tractor Cess) leviable under Industries (Development and Regulation) Act, 1957 read with Tractor Cess Rules, 1992, and Education Cess and Secondary Higher Education (SHE) cess leviable as duties of Excise under Finance Act, 2004 and Finance Act, 2007. 24. The petitioners are also engaged in the manufacture of IC engines, transmission assembly and sheet metal components (these items are referred to as aggregates), which are parts of tractors. The tractor parts manufactured are also wholly exempt from payment of duty with effect from 9th July, 2004 on a condition that they are used within the factory of production for the manufacture of tractors. Therefore, parts of tractors manufactured and cleared outside the factory for home co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner of Central Excise, the petitioners filed an appeal before the Commissioner of Central Excise (Appeals), Mumbai. The Commissioner of Central Excise (Appeals) Mumbai, by his Order-in-Appeal No. SB(43)43/MV/2009, dated 14th July, 2009, held that duty is definitely payable on the aggregates captively consumed and therefore, rejected the contention of the petitioners that the duty was payable on the aggregates at the time of export of the tractors in which they were used. Accordingly, the Commissioner of Central Excise (Appeals) confirmed the order passed by the Assistant Commissioner and held that there was delay in making the payment of duty on the aggregates captively consumed. Hence, the order of the Assistant Commissioner charging interest for the said delay in payment of duty was upheld by the Commissioner of Central Excise (Appeals). Annexure-E is a copy of the said order dated 14th July, 2009 passed by the Commissioner of Central Excise (Appeals). 30. The petitioners filed applications to the Commissioner of Central Excise, Mumbai-V, for fixing up of brand rate of drawback under the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Annexure-S is an illustrative copy of one of the appeals filed by the petitioners before Commissioner of Central Excise (Appeals). 34. The Commissioner of Central Excise (Appeals) by his common Order-in-Appeal Nos. SB (3 to 14) 3 to 14/MV/2010, dated 5th January, 2010, upheld all the 12 orders passed by the Additional Commissioner fixing the brand rate without taking into consideration, the duty paid on the aggregates captively consumed in the manufacture of tractors exported under drawback claim. Annexure-T is a copy of the said order dated 5th January, 2010. 35. Aggrieved by the aforesaid Order-in-Appeal dated 5th January, 2010, the petitioners filed Revision Applications before respondent No. 2. Annexure-U is a copy of the said Revision Application. The petitioners appeared on 31st May, 2011 before the respondent No. 2 and submitted a chart showing the details of duty paid through Cenvat account and the duty paid through PLA account during the relevant period along with written synopsis. The petitioners also submitted paper book containing circulars and case laws. Annexure-V is a copy of said chart submitted by the petitioners and Annexure-W is a copy of the written sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and partly by utilizing Cenvat credit of the duty paid on the inputs used in the intermediates consumed captively for manufacture of tractors for exports. Mr. Sridharan submits that ordinarily when final product is exempt from tax, no Cenvat credit of duty paid on the input is available. This is provided in Rule 6(1) of the Cenvat Credit Rules, 2004. However, Rule 6(6)(v) creates an exception for final products cleared for export under bond. He has, therefore, submitted that Rule 5 of the Cenvat Credit Rules, 2004 provides that Cenvat credit of duty paid on inputs used in tractors exported can be adjusted against any other liability of the assessee. If, adjustment is not possible, it will be refunded in cash. Hence, if parts are held to be exempted the duty paid is required to be refunded and Revenue cannot retain the same. There is no unjust enrichment since goods are exported. The alternative claim, therefore, was made before the authorities and that ought to have been granted particularly because they allowed drawback of duty paid on the inputs used in the manufacture of parts other than aggregates. In these circumstances, Mr. Sridharan submits that the impugned order deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be ₹ 275/- (Rs. 175/- paid by C + ₹ 100/- paid by A on Piston). In fact, granting exemption to Engine has the effect pushing up the amount of Excise duty is not in the interest of the consumer. 41. Let us take another situation in the above example where Y is the manufacturer of Engine. Engines are chargeable to nil rate of duty in terms of the Notification issued by the Central Government. In spite of the exemption provided to the Engine, Y opts not to avail exemption provided on Engine and pays duty on the Engine. Y manufactures Engines from the duty paid Piston supplied by A. The Central Excise duty paid on Piston is ₹ 100/-. Y manufactures Engine and supply the same to C. Y avails Cenvat credit of ₹ 100/- on piston and pays duty of ₹ 150/- on Engine. C manufactures Car from such Engine and pays duty of ₹ 175/- on the Car. C avails Cenvat credit of ₹ 150/- on Engine and pay duty of ₹ 175/- on Car. Hence, the total Excise duty paid on the Car would be ₹ 175/- only. 42. Mr. Sridharan submits that in the above illustrations an anomaly would arise if one manufacturer of Engine avails exemption and other is not availin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the Revenue. For the year 2005-06, the petitioners have paid ₹ 104 crores in Cenvat account. For the year 2006-07, the petitioners have paid ₹ 49/- crores in cash over and above ₹ 115 crores paid in Cenvat account. In view of this, even if it is held that the drawback is not available and the claim is treated as claim for refund of tax not payable, this money should be refunded in cash to the petitioners. 45. Mr. Sridharan further submits that period January, 2007 to March, 2008 is the subject matter of the Central Excise Appeal (Lodging) Nos. 8, 9 and 11 of 2013 against the Final Order Nos. A/394-397/12/EB/C-II of the CESTAT - 2012 (286) E.L.T. 369 (T). In this period, the petitioners have paid duty of an aggregate amount and taken the Cenvat credit of the same and the same was utilized for payment of duty. The CESTAT has held that in view of Section 5A(1A) the petitioners cannot pay the duty. Therefore, it has upheld that the demand and recovery of ₹ 15 crores being duty paid on aggregates and taken as Cenvat credit. This is plainly illogical. For all these reasons, the Writ Petition be allowed. 46. Mr. Sridharan also placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon para 2 of the additional affidavit in reply filed on behalf of the respondents (Affidavit of Mr. Rakesh Dahiya - Assistant Commissioner of Central Excise). He also submits that from para 3 of this affidavit, the respondents have demonstrated as to how in the case of an unconditional exemption, the assessee does not suffer any tax liability. If the legislature has decided to exempt certain goods from duty, then, such exemption is not optional. In this case, therefore, the Tribunal was in no error in dismissing the appeal. More so, when the petitioners/appellants while clearing these goods in the domestic market claim the benefit of exemption granted by the Notification and do not pay any duty either by adjusting the credit available in the Cenvat account or otherwise. While clearing the same goods for export, the petitioners paid duty at tariff rate by debiting it from Cenvat Credit Account. The petitioners/appellants have failed to sufficiently explain the reasons for paying duty on exempted goods. The contentions of the petitioners that the duty was paid to facilitate the department to verify the drawback claims is absolutely misleading. In these circumstances, there is no q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit Petitions be dismissed. 50. Mr. Kantharia placed reliance on the judgment in case of Collector of Central Excise v. Parle Exports (P) Ltd. reported in 1988 (38) E.L.T. 741 (S.C.). 51. With the assistance of the learned Counsel appearing for the parties, we have perused the paper book of both the appeals and the Writ Petition. We have also perused the statutory provisions, the relevant Notifications and the Affidavits so also the written submissions. The issue raised before us would require a brief reference being made to Section 5A of the Central Excise Act, 1944. That section reads as under : 5A(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of Excise leviable thereon : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured - (i) in a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, length, area, volume or other measure with reference to which the duty is leviable : (4) Every notification issued under sub-rule (1), and every order made under sub-rule (2), of Rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the Customs and Central Excises Laws (Amendment) Act, 1988 (29 of 1988) shall be deemed to have been issued or made under the provisions of this section and shall continue to have the same force and effect after such commencement until it is amended, varied, rescinded or superseded under the provisions of this section. (5) Every notification issued under sub-section (1) or sub-section (2A) shall, - (a) unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette; (b) also be published and offered for sale on the date of its issue by the Directorate of Publicity and Public Relations, Customs and Central Excise, New Delhi, under the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963). (6) Notwithstanding anything contained in sub-section (5), where a notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Table and subject to the relevant conditions specified in the Annexure to this notification, and condition number of which is referred to in the corresponding entry in Column (5) of the Table aforesaid : Provided that nothing contained in this notification shall apply to goods specified against S. No. 10 of the said Table on or after the 1st day of May, 2007. Explanation. - For the purpose of this notification, the rates specified in Column (4) of the said Table are ad valorem rates, unless otherwise specified. S. No. Chapter or Heading or sub-heading or Tariff Item of the First Schedule Description of excisable goods Rate Condition No. 6 8413 91 40 or 8414 90 Parts of hand pumps Nil - 13 8445, 8448, 8483 (except 8483 10 10) 8484, 8485 90 00 Goods required by a jute mill for making jute textiles Nil 2 14 8446 Automatic shuttle or shuttleless looms Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mn (3) of the Table. 5. If no credit of duty paid on the chassis and compressor has been taken under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2002. 6. If, - (i) made from unrecorded articles falling under Heading 8523; and (ii) (a) not intended for sale; or (b) intended for sale or supply to All India Radio or any other Department of Government of India in the Ministry of Information and Broadcasting; or (c) intended for sale or supply, in the form of U-matic video tapes formats of width not less than 19 millimetres, to Doordarshan. 7. If, - (a) intended for use by the Indian Railways or the Konkan Railway Corporation; and (b) the ownership of the said goods vests in the Indian Railways or the Konkan Railway Corporation. 8. (a) The manufacturer pays duties of Excise at the rate specified under the First Schedule and the Second Schedule read with exemption contained in any notification of the Government of India in the Ministry of Finance (Department of Revenue), at the time of clearance of the vehicle; (b) the manufacturer takes credit of the amount equal to the amount of duty paid in excess of that specified under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of refund determined, the manufacturer shall be eligible to take credit of the balance amount; and (d) The recovery of the credit availed irregularly or availed in excess of the amount of credit so determined, and not reversed by the manufacturer within the period specified under paragraph (c) above, shall be recovered as if it is a recovery of duty of Excise erroneously refunded. In case such irregular or excess credit is utilized for payment of Excise duty on clearance of excisable goods, the said goods shall be considered to have been cleared without payment of duty to the extent of utilization of such irregular or excess credit. 9. If manufactured out of chassis falling under Heading 8706 on which duty of Excise has been paid and no credit of duty paid on such chassis and other inputs used in the manufacture of such vehicle has been taken under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2002 : Provided that this exemption is not applicable to a manufacturer of said vehicles (a) who is manufacturing such vehicle on a chassis supplied by a chassis manufacturer, the ownership of which remains vested in the chassis manufacturer or the sale of the vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the goods are cleared from the factory, the manufacturer produces to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over his factory, a certificate from the Protocol Division of the Ministry of External Affairs that the concerned diplomatic agent/career consular officer is entitled to exemption from Excise duty on the principle of reciprocity; and (c) the concerned diplomatic agent/career consular officer availing of exemption gives an undertaking to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over his factory that the goods shall be put to his personal use. 15. If, - (i) the project for the purpose of substitution of ozone depleting substances or for setting up of new projects with non-ozone depleting substances (non-ODS) technologies has been approved by the steering committee set up in the Ministry of Environment and Forests of the Government of India for the clearance of such projects; (ii) the manufacturer furnishes, in each case, a certificate duly signed by an officer not belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falling under Heading 87.01, tractor skids 87.08, IC engines 84.08, transmission assembly 84.83 and parts thereof falling under 87.08, 84.09 and 84.83. Consequent upon the Union Budget 2004-05 vide Notification No. 23/2004-C.E., dated 8th July, 2004 the tractors falling under 87.01 are exempted from payment of Excise duty and the controversy started because a show cause notice was issued and which alleged that the petitioners/appellants clear manufactured tractors, which are unconditionally exempt from payment of duty by Notification No. 6/2006-C.E., dated 1st March, 2006, either for home consumption or for export. The assessee also cleared manufactured IC engines, transmission assembly and parts of tractors for captive consumption for manufacture of tractors meant for home consumption and export. These finished excisable goods are termed by the petitioners/appellants as aggregates. These aggregates are also unconditionally exempt from payment of duty of Excise vide Sr. No. 92 of the table to the Notification No. 6/2006-C.E., dated 1st March, 2006, if they are captively used in the factory of the production for manufacture of tractors. The petitioners/assessees took the stand as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of Mr. Kantharia that the exemption was unconditional. 56. If the exemption was unconditional, then, the petitioners/assessees could not have insisted on payment of duty on the exempted goods and thereafter insist that credit for the same be given to them or extended to them because the goods were inputs and exigible or eligible for Cenvat credit. 57. The stand taken by the Revenue and as reflected in their affidavit is, thus, justified. They had filed the affidavits in the Writ Petition which would indicate that the attempt of the petitioners/assessees is to show that they have taken credit of duty paid on the inputs used in the manufacture of IC engines, transmission assembly and sheet metal components which are referred to as aggregates by the petitioners. It is clear that in so far as the aggregates used in the manufacture of tractors for home consumption the petitioners are availing of the exemption available by virtue of Notification No. 6/2002-C.E., dated 1st March, 2002 which has been amended by further Notification bearing No. 23/2004-C.E., dated 9th July, 2004 and Notification No. 6/2006-C.E., dated 1st March, 2006. Though the aggregates are exempted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebate or refund or drawback as is now purported to be done. That would be plainly contrary to this clear legal position. Mr. Kantharia is right in urging that the legislature has not imposed any condition and hence the exemption in the case at hand is absolute. The assessees, therefore, cannot attempt to pay taxes on exempted goods and when the exemption is unconditional. If the manufacturer is not required to pay any duty on the exempted goods and in this case which are exported as also cleared in the local market, then, the assessee cannot attempt to pay the duty and seek to recover it. More so, when the assessees while clearing the excisable goods in domestic market claimed the benefit of exemption under the Notification and did not pay any duty either by adjusting the credit available in the Cenvat account or otherwise. There is no explanation forthcoming as to why while clearing the same goods for export, the petitioners/assessees pay duty at tariff rate by debiting it from Cenvat credit account. The only explanation is that duty was paid to facilitate the department to verify the drawback claims. In that case, the assessees would have paid the duty even in cases of the inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. Similar is the definition of the term exempted service and appearing in Rule 2(e). Thus, goods and service which carry the levy or the tax but which are exempt from the whole of the tax or the levy as also those which are chargeable to Nil rate of duty are exempted goods and services. The Cenvat credit can be availed of in terms of Rule 3(1) in the case of a manufacturer or producer of final products or provider of taxable service and he shall be allowed to take credit on the duty of Excise specified in the First Schedule to the Excise Tariff Act, the duty of Excise specified in the Second Schedule to the Excise Tariff Act, the additional duty of Excise, the National Calamity Contingent duty leviable under Section 136 of Finance Act, the Education Cess on excisable goods leviable under Section 91 read with Section 93 of the Finance Act and the Secondary and Higher Secondary Education Cess, etc., which have been paid and the manner in which such credit can be claimed is thereafter set out. Rule 4 enlists conditions for allowing Cenvat credit. Rule 5 provides for Cenvat credit and reads as under :- Rule 5. Refund of Cenvat credit. - Where any input or input service is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted services, except in the circumstances mentioned in sub-rule (2) : Provided that the Cenvat credit on inputs shall not be denied to job worker referred to in Rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take Cenvat credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which Service Tax is payable. (3) Notwithstanding anythi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; (c) the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent of the amount of Service Tax payable on taxable output service. Explanation I. - The amount mentioned in Conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the Cenvat credit or otherwise. Explanation II. - If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in Rule 14, for recovery of Cenvat credit wrongly taken. (d) notwithstanding anything contained in Condition (c), the provider of output service referred to in sub-clause (d) of clause (105) of Section 65 of the Finance Act has the option to utilise Cenvat credit attributable to inputs and input services used in providing taxable services subject to the following, namely :- (i) while exercising the option under this condition, the provider of output service shall intimate his option in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m (c) is less than the amount determined and paid as per item (a), adjust the excess amount on his own, by taking credit of such amount; (iv) the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of such payment or adjustment, the following particulars, namely :- (a) details of Cenvat credit attributable to exempted services, month-wise, for the whole financial year, determined provisionally as per part (iii) item (a), (b) the amount equivalent to Cenvat credit attributable to exempted services, determined provisionally for each month and paid month-wise as per part (iii) item (b), (c) Cenvat credit attributable to exempted services for the whole financial year as determined as per part (iii) item (c), (d) amount short-paid determined as per part (iii) item (d), along with the date of payment of the amount short-paid, (e) interest payable and paid, if any, on the amount short-paid, determined as per part (iii) item (e), and (f) credit taken on account of excess payment, if any, determined as per part (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) supplied to the United Nations or an international organization for 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) No. 108/95-Central Excise, dated the 28th August, 1995, Number G.S.R. 602(E), dated the 28th August, 1995; or (v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or (vii) all goods which are exempt from the duties of Customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of Section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of [Notification No. 6/2002-Central Excise, dated the 1st March, 2002 or Notification No. 6/2006-Central Excise, dated the 1st March, 2006, as the case may be]. 64. In the case at hand, the Tribunal concluded that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted services. Therefore, there is absolutely no justification for claiming the Cenvat credit. Mr. Kantharia is right in urging that the attempt was to now seek refund of Cenvat credit and only in relation to the duty amount paid on aggregates/parts and utilized for manufacture of tractors and cleared for exports, is to adjust the credit available in the Cenvat account. The Revenue in this case has relied upon Rule 6(6) in that behalf and we do not find the said reliance to be misplaced. Before the Tribunal, reliance was placed on these rules but in the light of the above clear provisions, the Tribunal did not permit the assessees to place reliance on the same in its entirety. Para 8 of the Tribunal s order reads as under :- We find that in the case of Repro India Ltd. (supra), the Bombay High Court has held that exempted goods can be exported under Bond/UT-1 in terms of Rule 19 of the Central Excise Rules, 2002. It has also been held that in terms of Rule 6(6)(v) of the Cenvat Credit Rules, 2004, the provisions of Rule 6(1) and 6(3) are not applicable in respect of excisable goods cleared without payment of duty for export under Bond. In view of this, the orders of Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith their sub-clauses. While it is true that Explanation (iii) clarifies that the credit shall not be allowed on inputs and input services, it is apparent that the same relates to both, the credit allowable on inputs and input services. 69. It is clear from a reading of para 8 of the Tribunal s order that the Tribunal has considered the effect of the Cenvat Credit Rules, 2004 and particularly the sub-rules which we have referred above. Therefore, the demands of duty have been set aside. 70. Mr. Sridharan would rely upon the same reasoning of the Tribunal and to submit that even the demands which are confirmed ought to have been set aside relying on the conclusions in para 8. 71. However, that was an issue in relation to wrong availment of Cenvat credit on aggregates used captively in the manufacture of exempted tractors cleared for export. In relation to that the Tribunal placed reliance on the clear language of Section 5A(1A). Section 5A(1A) inserted by Act 18/2005 with effect from 13th May, 2005. Once this provision has been inserted and the exemption under sub-section (1) of Section 5A in respect of any excisable goods from the whole of the duty leviable thereon has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en relied upon by Mr. Sridharan. Heavy reliance is placed upon the judgment of this Court in the case of Repro India Limited (supra). In Repro India Limited, the issue which was raised and dealt with by this Court pertains to the Cenvat credit. There, the petitioners were engaged in the manufacture of packaged software falling under Chapter 85.23 of the First Schedule of the Central Excise Tariff Act, 1985 and liable to duty at 8% since 1st March, 2006. They were also engaged in the manufacture of stationery books such as letter pads, etc., falling under Heading 48.20 of the First Schedule to the Central Excise Tariff Act, 1985 and liable to duty at 16% and printed books and other products of Printing Industry falling under Heading 4901 of the First Schedule of Central Excise Tariff Act, 1985 which were chargeable to nil rate of duty at the relevant time. The printed books were entirely exported by the petitioners. The controversy was about the Cenvat credit taken in respect of the duty paid on the inputs used in the manufacture of these products. The said credit is utilized for payment of duty on packaged software and stationery books. The refund in cash was claimed for credit whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Modvat credit could not be denied on such duty paid inputs if used in the manufactured final products. The respondent-assessee accordingly, chose to pay the duty and availed of the Modvat credit. There was a subsequent Notification withdrawing the earlier trade notice and the issue was re-examined alleging that the assessee had no option but to avail of the exemption. In the case where the goods were fully exempted from payment of duty, the show cause notice was issued, demand raised and which came to be confirmed. The assessee preferred an appeal to the Tribunal and which reversed the department view holding that the assessee had the option not to avail of the exemption but to pay the duty and avail of the Modvat credit. The department went in appeal to the Hon ble Supreme Court against the decision of the Tribunal but because the issue was technical and there was no revenue implication, the Hon ble Supreme Court refused to interfere with the Tribunal s view. 76. A similar approach was adopted in the case of Commissioner of Central Excise and Customs, Vadodara v. Narmada Chematur Pharmaceuticals Ltd. reported in 2005 (179) E.L.T. 276. 77. The reliance placed by Mr. Sridhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sy in the show cause notice. The controversy was why Excise duty should not be recovered on peppermint oil exported by the assessee. The assessee replied that both final products were exported, therefore, it was entitled to utilize the input credit in paying the Excise duty on peppermint oil and claim rebate of that duty. That contention of the assessee was accepted by the Commissioner of Central Excise in the original order. However, it transpired that the rebate claims filed from time to time were considered and allowed in terms of the Order-in-Original referred to in para 10. Against these orders, the Revenue went in appeal but the appeal was dismissed. That is how the matter was carried in revision to the Central Government and in revision the stay was sought but refused. 81. The undisputed facts have been noted from para 19 and from para 21 a reference was made to the Cenvat Credit Rules. The observations which have been relied upon by Mr. Sridharan are to be found in paras 22 and 23. These paras are reproduced as under : 22. It is true that under Rule 6(1) of the 2004 Rules, credit of duty paid on inputs is not allowable when the inputs are used in the manufacture of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bond in terms of provisions of Central Excise Rules, 2002. The exemption carved out by Rule 6(6), therefore, must be seen in this light. Once, all this is noted and in proper perspective, then, it would be apparent that Mr. Sridharan s reliance on this judgment is misplaced. There, Excise duty on peppermint oil was not exempted and the rebate claims were allowed bearing in mind the above noted factual position and with regard to which there was no dispute. However, if the attention of the Division Bench had been invited to the wordings of the sub-rules and in their proper perspective, then, the reference made by the Bench to some of the rules would have been accurate. However, we need not pursue the matter any further once it is held that the reliance on this judgment is wholly misplaced. 84. These all matters which arose firstly before the amendment to the Central Excise Act, 1944 by which the sub-section (1A) was inserted in Section 5A of the Act. Therefore, the question of option now does not arise. Further, in so far as the Cenvat credit and in terms of the Cenvat Credit Rules, 2004, what one finds is that the credit as is claimed and in relation to input and input service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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