Commissioner Of Central Goods And ... vs M/S Orient Syntex (Prop. Apm ...
2022 Latest Caselaw 4154 Raj/2

      HIGH COURT OF JUDICATURE FOR RAJASTHAN
                  BENCH AT JAIPUR

             D.B. Central Excise Appeal No. 8/2021

Commissioner Of Central Goods And Service Tax, Alwar, A-Block,
Surya Nagar, Alwar, Rajasthan.
                                                                  ----Appellant
                                   Versus
M/s Orient Syntex (Prop. Apm Industries Ltd.), Sp-147, Riico
Industrial Area, Bhiwadi, Alwar.
                                                                ----Respondent

For Appellant(s) : Mr. Ajay Shukla, Adv.

For Respondent(s) : Mr. Narendra Singhvi, Adv.

HON'BLE MR. JUSTICE PRAKASH GUPTA HON'BLE MR. JUSTICE SAMEER JAIN

Judgment

Reserved on 18/05/2022 Pronounced on: 27/05/2022

Per: HON'BLE MR. JUSTICE SAMEER JAIN

1. Present Central Excise Appeal has been filed by the

Revenue- appellant under Section 35G of the Central Excise Act,

1944 (the 'Act of 1944') read with Section 83 of the Finance Act,

1994 further read with Section 174 of the Central Goods and

Services Tax Act, 2017 against the Order No. A/51638/2020-

EX[DB] dated 09.12.2020 passed by CESTAT whereby the appeal

filed by the Respondent- assessee was allowed and order dated

04.10.2019 passed by Commissioner (Appeals), Central Excise &

Central Goods and Services Tax, Alwar was set aside.

2. The revenue has filed present appeal on the following

Substantial Questions of Law which reads as under:-

(2 of 7) [EXCIA-8/2021]

"(I) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was correct in allowing CENVAT credit on capital good procured and installed by the assessee for the purpose of manufacture of the said goods which are exempted from payment of duty even though the purpose of installation of the capital goods and intention of the assessee is clearly manifest in the intimation they have given to the department on 08.04.2016 and the manner in which they have conducted themselves by manufacturing and clearing exempted goods constantly?

(II) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was correct in interpreting Rule 6(4) of the CENVAT Credit Rules, 2004?

(III) Any other question of law as the Hon'ble High Court may formulate in the facts and circumstances of the Case?"

3. The brief facts of the case are that the respondents,

engaged in manufacture of Polyester Viscose Yarn, installed capital

goods in their factory during the financial year 2016-17. In the

same year the appellant had partly cleared final products falling

under exemption Notification No.30/2004-CE dated 09.07.2004

and exported some goods under bond, under Rule 19 of the

Central Excise Rule, 2002.

4. It is also an admitted fact that some part of the final

goods were cleared on payment of duty during the year 2017-18.

The respondent is a registered person and has been filing due

returns from time to time and maintaining record. It was only by

the audit team of the department that the department changed

the opinion whereby the Respondent was made liable for short

payment of duty. At the time of receipt of the goods they were

(3 of 7) [EXCIA-8/2021]

under the exemption and therefore vide Show Cause Notice (SCN)

dated 11.04.2018, the demand of Rs.1,40,72,105/- was raised for

violation of Rule 6(4) of the CENVAT Credit Rules, 2004. The show

cause notice was dropped by the Adjudicating Authority vide

Order-in-Original dated 27.07.2019, wherein it was categorically

held by the Adjudicating Authority that the assessee was entitled

to take CENVAT Credit on capital goods received by him during

2016-17 as the capital goods installed and used for manufacturing

dutiable goods as well as exempted goods in terms of Notification

dated 09.07.2004 cannot be considered as used exclusively for

manufacturing exempted goods in terms of proviso to Rule 6(4) of

the CENVAT Credit Rules, 2004.

5. The said Order-in-Original dated 27.07.2019 of the

Adjudicating Authority was assailed by Revenue- appellant

whereby the Commissioner (Appeals) vide order dated 04.10.2019

allowed the appeal on the premise that as per amended Rule 6(4)

of the CENVAT Credit Rules, 2004, w.e.f. 01.04.2016 CENVAT

credit was not available on capital goods used exclusively in the

manufacture of exempted goods for a period of two years. The

admissibility of credit is to be decided on the date of receipt of

goods and in the facts of the case, the date of receipt being during

2016, the CENVAT credit was not admissible as at that point of

time goods were exempted.

6. Aggrieved from order dated 04.10.2019, the Respondent-

assessee filed an appeal before the CESTAT relying upon Rule

6(4), Rule 6(6)(v) of the CENVAT Credit Rules, 2004 and various

judgments of Hon'ble Apex Court and different High Courts.

Learned Tribunal by order dated 09.12.2020 allowed the appeal of

assessee and set aside the order dated 04.102019 on the ground

(4 of 7) [EXCIA-8/2021]

that as per amended Rule 6(4), no credit is allowed on capital

goods used exclusively in the manufacture of exempted goods for

a period of two years, and as the assessee had cleared goods on

payment of duty during 2017-18 as evidenced by ER-1, filed for

June 2017, and they had installed the capital goods in 2016-17,

the provision of amended Rule 6(4) the credit is admissible to the

appellant. Rule 6(6)(v) of CENVAT Credit Rules, 2004 which

specifies that the goods exported under bond cannot be treated as

exempted good, and in the said situation credit is permissible.

7. This court has considered the records of the appeal,

judgments cited at bar and the arguments advanced by the

respective parties.

8. On perusal of the records and consideration of the

arguments following admitted points emerge:-

(i) Respondent is registered firm/company and has been filing

regular returns.

(ii) It was only upon audit objection that the demand was raised.

(iii) The Adjudication Authority vide order dated 27.07.2018 has

adjudicated the demand in favour of the respondent and dropped

the show cause notice.

(iv) The CESTAT by passing directions under Rule 6(4) of the

CENVAT Credit Rules, 2004, has allowed the appeal of assessee on

the fact that the assessee had cleared goods on payment of duty

during 2017-18 as evidenced by ER-1, filed for June 2017 and

they had installed the capital goods in 2016-17 and as per

amended Rule 6(4), no credit is allowed on capital goods used

exclusively in the manufacture of exempted goods for a period of

two years, therefore, the credit is admissible to the appellant.

(5 of 7) [EXCIA-8/2021]

(v) Learned Commissioner (Appeals) inspite of the fact that capital

goods were not exclusively used for exempted goods, had without

any application of mind and without considering the above facts,

allowed the appeal of Revenue.

9. We have considered the order of the Tribunal. At this

juncture it is important to consider the amended Rule which was

substituted in place of erstwhile Rule 6(4) of CENVAT Credit Rules,

2004, the same is retreated below which reads as under:

"(4) No CENVAT credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercial production or provision of services, as the case may be, other than the final products or output services which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made or services provided in a financial year:

Provided that where capital goods are received after the date of commencement of commercial production or provision of services, as the case may be, the period of two years shall be computed from the date of installation of such capital goods."

10. On perusal of the said Rule which is absolutely clear

that if capital goods are used for manufacture of dutiable goods

within a period of two years from the date of commencement of

commercial production or from the date of installation as per

proviso, the same will be entitled for CENVAT Credit. It is relevant

to consider that in light of Section 37 of the Act of 1944, the

CENVAT Credit Rules, 2004, are framed with the beneficiary

intention and to give exclusive effect of duty paid under the VAT

regime of Taxation. The legislature in its wisdom has exclusively

specified in Rule 6(4) of the CENVAT Credit Rules, 2004 that the

(6 of 7) [EXCIA-8/2021]

credit upon capital goods will not only be debarred and restricted

but also not allowed when the same are exclusively used for

manufacture of exempted goods for a period of two years from

the date of installation/commencement of production.

11. In the case in hand, as per ER-1 return from the month

of June- 2017, it is an admitted fact that the appellant had cleared

the goods on payment of duty within period of two years. Further,

the provisions of CENVAT Credit Rules, 2004 have to read in

totality. On analysis of CENVAT Credit Rules, 2004 particularly Rule

6(6)(v) which are explanation to Rule 6(4), this court finds that in

the year 2016-17 the goods were exported under bond. It is also

true that in terms of Notification No.30/2004-CE dated 09.07.2004

option was exercised for exemption in the year 2016. The said fact

does not debar the respondents from availing the credit.

Provisions of Rule 6(4) read with Rule 6(6)(v) of the CENVAT

Credit Rules, 2004 gives a time of two years to avail CENVAT

Credit. Reliance placed by the learned counsel for the revenue on

Notification No.30/2004-CE dated 09.07.2004 issued under

Section 5A qua exemption and the option exercised by the

appellant and also on judgment of Rajasthan High Court regarding

admission of appeal on similar Substantial Question of Law in

Nitin Spinners Ltd. Vs. Commissioner: 2019 (366) E.L.T.

A185 (Raj.) is of no persuasive value as in CCE Vs. Drish Shoes

Limited: 2010 (254) ELT 417 (HP), Repro India Limited Vs.

Union of India: 2009 (235) ELT 614 (Bom) and CCE,

Chennai-III Vs. Same Duetz Fahr India (P) Limited: 2017

(6) GSTL 453 (Mad.) it has been concurrently held that if the

capital goods are not used exclusively for period of two years qua

(7 of 7) [EXCIA-8/2021]

the exempted goods and if the capital goods are further used for

manufacture of exported goods also, the CENVAT Credit on the

said goods is available and is not debarred.

12. In light of series of judgments and facts referred above

which the learned counsel for the revenue was not able to refute

we are inclined to dismiss this appeal.

13. In the present appeal placing reliance upon the Apex

Court Judgment in the case of Steel Authority of India Ltd. Vs.

Designated Authority, Directorate General of Anti Dumping

& Allied Duties & Ors.: (2017) 13 SCC 1, wherein the question

of admission of an appeal on substantial question of law was

considered and it was held as under:-

"(i) The question raised must involve a substantial question of law which has not been answered or, on which, there is a conflict of decisions necessitating a resolution.

(ii) If the Tribunal, on consideration of the material and relevant facts, had arrived at a conclusion which is a possible conclusion, the same must be allowed to rest even if this Court is inclined to take another view of the matter.

(iii) The Tribunal had acted in gross violation of the procedure or principles of natural justice occasioning a failure of justice."

14. In light of above, this court finds that no Substantial

Question of Law arises in the present matter and therefore, the

appeal is dismissed. All pending applications also stand dismissed.

                                    (SAMEER JAIN),J                                                (PRAKASH GUPTA),J




                                   JKP/12









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