TMI Blog2021 (3) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... rity. First was to encourage investment in manufacturing units of specified products in the North-Eastern States. The second purpose also is equally important namely, that the element of duty waived by the Government of India is also ploughed back into the region by augmenting the manufacturing capability of a unit in the said region or for other purposes such as development of infrastructure or civil works or social projects in the region. The amount of duties saved by the manufacturer thus under this Notification, was to be utilized in a specified manner. As per Rule 2(d), exempted goods would mean excisable goods which are exempt from the whole of the duty of excise leviable thereon or the goods which are chargeable to Nil rate of duty. The exemption Notification dated 21.01.2004 as amended subsequently cannot be seen as a Notification granting unconditional exemption from payment of duties. Such exemption was conditional on various requirements which limited the scope of the assessee to utilize the duty element so exempted, for any purpose at all. Such exemption, thus, did not directly increase the profitability of the product since the assessee could not retain the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional excise and other duties. This exemption was subject to the condition that an amount equal to the sum of basic duty, special excise duty, additional excise duty and other duties which were exempt under the said Notification would be utilized by the manufacturer only for specified investments. 3. The assessee claimed CENVAT credit on the inputs utilized for manufacture of the final product. The adjudicating authority, however, was of the opinion that since the final product was exempt from payment of due date, the assessee could not have availed a CENVAT credit paid on the inputs utilized in such final product. The adjudicating authority therefore issued a show cause notice on the premise that the assessee s unit was exempt from payment of the duties of excise and other duties and on the basic principle of claiming CENVAT credit since the final product was not dutiable, CENVAT credit would not be available on the raw material and inputs utilized for manufacture of this final product. He called upon the assessee why the CENVAT credit to the tune of ₹ 3.48 Crores (rounded off) availed by the assessee on inputs and capital goods for the period between 01.03.2005 to 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand, learned senior counsel, Mr. A.K. Saraf for the assessee drew our attention to the applicable statutory provisions and various decisions to contend that the final product was not exempt from all kinds of duties. The term exempt goods defined under Rule 2(e) of CENVAT Credit Rules would cover only those products which are exempt from payment of all kinds of duties. In any case, the Notification dated 21.01.2004 was one of conditional exemption. The duties of excise waived by the Central Government could be utilized only for the purpose of expansion of the industry in the same region. Till this was done, the money had to be deposited in escrow account. If within specified time, the amount was not utilized for such purpose, the exemption would lapse. 9. As is well-known, Rule 3 of the CENVAT Credit Rules enables a manufacturer or producer of final products to take credit of CENVAT on payment of various duties on the inputs and capital goods utilized for the purpose of manufacturing the final product. Rule 6 of the said Rules pertains to obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. Sub-Rule (1) and (4) of Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification, as noted, for units located in North-Eastern States including the State of Tripura, on the specified products subject to certain conditions, payment of basic duty of excise, the additional duty and National Calamity Contingent duties would be exempt. However, this exemption was conditional as can be seen from the following portion of the exemption Notification: (A). the exemption under this notification shall be available only in respect of a unit which,- (i) is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram , Nagaland or Tripura ; (ii) had commenced commercial production on or after the 24th day of December, 1997, but not later than the 28th day of February, 2001; (iii) had availed of the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508 (E) dated the 8th July, 1999] or No. 33/99-Central Excise, dated the 8thJuly, 1999 [G.S.R. 509 (E) dated the 8th July, 1999]; and (iv) has continued its manufacturing activities after the 28th day of February, 2001; (B). an amount equal to the sum of bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawn. This Notification was amended under a subsequent Notification dated 09.07.2004; however, basic terms for claiming exemption remain the same. We would therefore not duplicate the contents of such Notification. An analysis of the above quoted portion of the exemption Notification would show that over and above the basic requirements for the qualification of the product for exemption, the entire scheme of exemption was peculiar. Firstly, the amount equivalent to the sum of the basic excise duty and other duties waived under the said Notification, would be utilized by the manufacturer only for investment in the plant and machinery in a manufacturing unit which is located in those North-Eastern States or for infrastructure or civil works or social projects in such States. Such investment should also be made before expiry of six months from the end of each quarter. The manufacturer would provide all details relating to such investments. Only when the committees specially constituted for such purpose was satisfied that the investment as required have been made, it would issue a certificate to the manufacturer which the manufacturer would produce before the jurisdictional Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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