The Eastern Zonal Bench of the Customs, Excise and Service Tax Appellate Tribunal, Kolkata ( CESTAT ) held that Central Value Added Tax ( CENVAT ) Credit can be availed on inputs used in the manufacture of bulk drugs on which export duty has already been paid by the Appellant.
Ten Excise Appeals having common issues were filed by M/s Fresenius Kabi Oncology Ltd., an establishment manufacturing bulk drugs for home consumption and export. The bulk drugs manufactured by the Appellant are not eligible to be used directly, but are further used in the manufacture of other drugs and medicines.
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The Appellant claimed classification under HSN Chapter 28 ( Inorganic Chemicals ) and Chapter 29 ( Organic Chemicals ) for the products manufactured by them. Goods falling under Chapters 28 and 29 have been specified in Notification No.4/2006 – Central Excise dated 21.03.2006 and further amended vide Notification No.12/2012-Central Excise dated 17.03.2012.
It was contended by the Revenue Department that ‘Drugs’ and ‘Bulk Drugs’ being the same, the Appellant is already claiming exemption from duty by means of Notification No.12/2012-Central Excise, and thus claimed that a manufacturer of exempt goods cannot avail CENVAT Credits on Inputs used in the manufacture of exempt goods.
The Revenue Department subsequently initiated proceedings for the retraction of CENVAT Credit on the grounds that the Appellant had exported the bulk drugs manufactured by them by paying duty and further erroneously claimed rebate on the duty while being ineligible to do so.
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The Appellant was subject to Show-Cause Notice ( SCN ) and penalties by the Revenue Department under the premise that the Appellant had wrongly paid duty and erroneously claimed rebate on an item that was exempt from duty in the first place.
The two-member Bench of the Eastern Zonal Bench Customs, Excise and Service Tax Appellate Tribunal, Kolkata composed by Ashok Jindal, Judicial Member and K. Anpazhakan, Technical Member, observed that Condition 2 of Notification No.12/2012-Central Excise is applicable to Entry No. 47B (Bulk Drugs) of the same Notification.
The Bench further noted that the Goods manufactured by the Appellant shall be exempt from payment of duty upon fulfilment of Condition 2, only if the Goods may be classifiable as ‘Bulk Drugs’.
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CESTAT distinguished that bulk drugs and drugs are two separate items and in light of this observation, held that the Appellant is manufacturing bulk drugs and not fulfilling Condition 2 of Notification No.12/2012-Central Excise, and therefore the bulk drugs manufactured by the Appellant are dutiable.
In light of the observations made, CESTAT while allowing the Appeals held that the Appellant had rightly paid the export duties leviable on the bulk drugs and claimed rebate on the duty paid, and CENVAT Credit on the Inputs in lieu thereof.
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